Severance Pay

What is Severance Pay?

Severance pay is money paid to an employee when they are retrenched, usually at least one week’s pay for each completed year of service.

Think of it like this…

It’s financial cushioning for someone losing their job due to no fault of their own.

Why does it matter?

• Required under the Basic Conditions of Employment Act (BCEA) for retrenchments
• Calculated on the employee’s most recent remuneration
• Can be more generous if agreed in contracts or policies

Best practice

Follow a fair, consultative retrenchment process and document everything to avoid disputes.