09th April 2018
LABOUR BRIEF NO. 408
Employers are not always aware of what an employee is entitled to upon termination of service. Especially, when the relationship ends with debt owed to the employer.
Can the employer for instance, deduct the debt from the employee’s salary, leave pay or pension benefits and if so, how much can be deducted. If the full amount cannot be deducted, then what can be deducted if any?
Another issue to consider is what to do with damages caused by the employee? Can the employer deduct damages caused by an employee from her salary?
Payment on termination of employment is regulated by the Basic Conditions of Employment Act, 1997 (No. 75 of 1997) Chapter Five: Termination of employment.
This section does not apply to employees who work less than 24 hours per month.
Section 37 deals with notice of termination of employment. In terms of this section, (subject to section 38), a contract of employment terminable at the instance of a party to the contract, may be terminated only on notice of not less than one week, if the employee has been employed for six months or less.
Notice of two weeks must be given if the employee has been employed between six months and one year and notice of four weeks must be given if the employee has been employed for one year or more or is a farm worker or domestic worker who has been employed for more than six months.
A collective agreement may permit a notice period shorter than required as set out in the above paragraph, however the four weeks’ notice period may not be reduced to less than 2 weeks.
No agreement may require or permit an employee to give notice for a period that is longer than that required of the employer. Notice of termination of a contract of employment must be given in writing, except when it is given by an illiterate employee.
If an employee who receives notice of termination is not able to understand it, the notice must be explained orally by, or on behalf of, the employer to the employee in an official language the employee reasonably understands.
Notice of termination of a contract of employment given by an employer must not be given during any period of leave to which the employee is entitled in terms of Chapter Three. Notice may not run concurrently with any period of leave to which the employee is entitled in terms of Chapter Three, except sick leave.
Therefore, an employer may not give notice during any leave period, including sick leave, normal leave, family responsibility leave or maternity leave.
A notice period may also not run during normal, family responsibility or maternity leave, regardless whether the employee resigned or the employer gave notice. However, notice may run concurrently with sick leave, if the employee gave notice (resignation). If the employee therefore becomes sick during the notice period, after he resigned, the notice period will continue running.
Nothing in this section affects the right of a dismissed employee to dispute the lawfulness or fairness of the dismissal in terms of Chapter VIII of the Labour Relations act 1995, or any other law; and of an employer or an employee to terminate a contract of employment without notice for any cause recognised by law. Currently our law recognises termination without notice for misconduct cases alone.
Section 38 deals with payment instead of notice (or in lieu of notice). Instead of giving an employee notice in terms of section 37, an employer may pay the employee the remuneration the employee would have received, calculated in accordance with section 35, as if the employee had worked during the notice period.
If an employee gives notice of termination of employment, and the employer waives any part of the notice, the employer must pay the remuneration referred to in subsection (1), unless the employer and employee agree otherwise.
Section 39 deals with termination of service of employees in accommodation provided by employers.
If the employer of an employee who resides in accommodation that is situated on the premises of the employer or that is supplied by the employer, terminates the contract of employment of that employee before the date on which the employer was entitled to do so in terms of section 37 or in terms of section 38, the employer is required to provide the employee with accommodation for a period of one month, or if it is a longer period, until the contract of employment could lawfully have been terminated.
If an employee elects to remain in accommodation in terms of subsection (1) after the employer has terminated the employee’s contract of employment in terms of section 38, the remuneration that the employer is required to pay in terms of section 38 is reduced by that portion of the remuneration that represents the agreed value of the accommodation for the period that the employee remains in the accommodation.
Section 40 determines the payments on termination of service. On termination of employment, an employer must pay an employee —
- For any paid time off that the employee is entitled to in terms of section 10(3) or 16(3) that the employee has not taken;
- Remuneration calculated in accordance with section 21(1) for any period of annual leave due in terms of section 20(2) that the employee has not taken; and
- If the employee has been in employment longer than four months, in respect of the employee’s
- Annual leave entitlement during an incomplete annual leave cycle as defined in section 20(1) —
- one day’s remuneration in respect of every 17 days on which the employee worked or was entitled to be paid; or
- ii) remuneration calculated on any basis that is at least as favourable to the employee as that
Calculated in terms of subparagraph (i).
In terms of section 41, an employer must pay an employee who is dismissed for reasons based on the employer’s operational requirements (retrenchment) or whose contract of employment terminates or is terminated in terms of section 38 of the Insolvency Act, 1936 (Act No. 24 of 1936), severance pay equal to at least one week’s remuneration for each completed year of continuous service with that employer, calculated in accordance with section 35.
An employee, who unreasonably refuses to accept the employer’s offer of alternative employment with that employer or any other employer, is not entitled to severance pay in terms of subsection.
The payment of severance pay in compliance with this section does not affect an employee’s right to any other amount payable according to law. If there is a dispute about the entitlement to severance pay in terms of this section only, then the employee may refer the dispute in writing to the CCMA or bargaining council.
In terms of section 42, on termination of employment an employee is entitled to a certificate of service.
(Chairperson – (CEA – LBD)