Employment law update – Severance pay and a new amendment to the BCEA

April 1st, 2019


I am a teacher who was permanently employed during 2018. I only worked a year and was retrenched due to lack of learner registration this year, so I was not allocated a class for 2019.

I was teaching preschool learners at a primary school and was earning R 6 000 monthly. My employer paid me a retrenchment package of only R 1 000. According to my employer, the law states that for each year worked, one week must be paid to me and so it is R 1 000 a week in a year.

Is this true?


I will assume you were either employed at a private school, alternatively if it was a public school, you were employed directly by the school’s governing body and you were not employed by the state under the Employment of Educators Act 76 of 1998. My assumption is underpinned by the fact that it is highly unlikely that the state as employer would embark on retrenchment proceedings. The necessity to make this distinction with regard to who your employer, directly bears on the answer to your query.

It is correct that severance pay is calculated at one week’s remuneration for each completed year of continuous service. This is in terms of s 41(2) of the Basic Conditions of Employment Act 75 of 1997 (BCEA).

Therefore, receiving one week’s pay as your severance package for one year of service, is correct. I do not, however, agree with the quantum you received. Calculating weekly pay in respect of employees receiving a monthly salary is done by dividing one’s salary by 4,333.

In your case you earned R 6 000 per month, which means your weekly pay was R 1 384,72 (R 6 000/ 4,333). This in turn means you should have received R 1 384,72 as your severance package and not R 1 000.

Before addressing what legal recourse is open to an employee who does not agree with the amount of severance pay they received, it is important to note that there is nothing preventing an employee and employer from negotiating more favourable terms for calculating severance pay. Therefore, an employee and employer can agree that severance pay will be calculated at two weeks remuneration for every completed continuous year of service.

If there is a dispute about an employee’s severance pay, then an employee can refer a severance pay dispute to either the Commission for Conciliation Mediation and Arbitration (CCMA) or to a bargaining council, which has jurisdiction.

Section 41(6) to (9) of the BCEA, gives the CCMA or bargaining council the authority to conciliate and arbitrate such disputes.

In addition to your severance pay, you should have also received payment for any outstanding leave, if any, that was accruing to you at the time of your dismissal. Having worked a year, you would have been entitled to 21 consecutive days leave, on full remuneration. This is in accordance with s 20(2)(a) of the BCEA.

If at the time of your retrenchment you had leave owing to you and this had not been paid out by the school, then in terms of s 74(3) of the BCEA, you could include your leave pay dispute, with the severance pay dispute and refer both matters to the CCMA.

Having addressed the question posed, it would be an opportune time to advise readers of the introduction of s 77A to the BCEA. In the past the only time the CCMA could hear and address a dispute regarding the non-payment of statutory money was if the employee had referred an unfair dismissal dispute or a severance pay dispute to the CCMA. When adjudicating the fairness of the dismissal or the severance pay dispute and provided certain other conditions were met (see s 74(2)(a) to (c) which has since been repealed effective 1 January 2019), the commissioner would hear any dispute regarding statutory money and if finding in favour of the employee included in their arbitration award, a finding that the employer pay to the employee such outstanding money. This meant that in the absence of challenging a dismissal or one’s entitlement to severance at the CCMA, an employee who wanted to claim overtime pay, for example, had to approach the Department of Labour for assistance.

Section 73A, as part of the 2018 amendments, now provides that any employee who earns less than the Ministerial threshold can refer a dispute to the CCMA ‘concerning the failure to pay any amount owing to that employee or worker in terms of this Act, the National Minimum Wage Act, 2018, a contract of employment, a sectoral determination or a collective agreement.’

These disputes follow the normal dispute resolution path set out in the Labour Relations Act 66 of 1995; first conciliation followed by arbitration if a certificate of non-resolution has been issued.

Disclaimer: Please note that the advice offered in this article has been prepared not only for the intended benefit of the individual who has sent through the query, but to share Mr Naidoo’s views with readers in general and legal practitioners, in particular. Mr Naidoo has not consulted with the person seeking advice nor has he any knowledge of any facts or circumstances other than that set out in the query. Mr Naidoo’s views are based solely on his understanding of the law. Mr Naidoo cannot be held liable, professionally and/or personally, for any views and/or advice expressed in his response.

Moksha Naidoo BA (Wits) LLB (UKZN) is a practicing advocate holding chambers at the Johannesburg Bar (Sandton), as well as the KwaZulu-Natal Bar (Durban).

This article was first published in De Rebus in 2019 (April) DR 36.