Severance Pay Calculator

Under Section 41 of the Basic Conditions of Employment Act (BCEA), an employee who is retrenched is entitled to at least 1 week's remuneration for each completed year of continuous service. This is the statutory minimum — your employment contract or collective agreement may provide for more generous severance terms.

A retrenchment package typically includes: (1) statutory severance of 1 week's pay per completed year of service, (2) notice pay if your employer does not work out your notice period, and (3) payout of unused annual leave. Use this calculator to total each component. Severance is taxed under retirement lump sum tables — see our retirement lump sum calculator for the tax impact.

Yes, severance pay is taxable but it is taxed under the more favourable retirement lump sum tax tables (not as normal income). The first R550,000 of the lump sum is tax-free (reduced by any previous retirement lump sums received). Amounts above this are taxed at rates ranging from 18% to 36%. This makes it significantly more tax-efficient than normal salary.

Under the BCEA, the minimum notice periods are: 1 week if employed for less than 6 months, 2 weeks if employed for 6 months to 1 year, and 4 weeks if employed for more than 1 year. Your employment contract may provide for a longer notice period. If the employer does not give notice, they must pay you in lieu of the notice period.

Yes. The BCEA provides the minimum entitlement of 1 week per completed year. Many employers offer more generous packages, especially for long-serving employees or during large-scale retrenchments. You can negotiate through the Section 189 consultation process. It is advisable to seek legal advice or CCMA assistance during negotiations.

Any accrued but untaken annual leave must be paid out at your normal daily rate upon termination. This applies regardless of the reason for termination — retrenchment, resignation, or dismissal. The payout is calculated as: remaining leave days multiplied by your daily rate (monthly salary divided by 21.67).

If your employer fails to pay the statutory severance, you can refer the dispute to the CCMA (Commission for Conciliation, Mediation and Arbitration) within 12 months of the dismissal date. The CCMA will attempt conciliation, and if that fails, the matter can proceed to arbitration. You do not need a lawyer at the CCMA.