Page 35 - DRG HR HANDBOOK- Nikita Pillay

ƒ proposed selection criteria for selecting employees TAX DIRECTIVES
for retrenchment
The employer must submit a tax directive application
ƒ time when the retrenchment is likely to take effect
to SARS before the lump sum amount is paid to the
ƒ proposed severance pay employee. The employer will apply for a tax directive by

ƒ any assistance that the employer proposes to offer filling in an IRP3(a) form, and sending it to SARS. Upon
the employees who are retrenched receipt of this form, SARS will work out the correct
amount of employees’ tax that the employer must
ƒ possibility of future employment of the employees
withhold on the severance benefit, and the employee
who may be retrenched
will receive that benefit net of tax from the employer.
ƒ number of employees of the employer; and/or
The employer will issue the employee with an IRP5 tax
ƒ number of employees that have been retrenched for certificate reflecting the gross amount of the benefit and
the last 12 months. the employees’ tax that was deducted. the employee
will need to declare this in his annual income tax return.
If the information on the notice is insufficient, the
consulting employees may request the employer to UIF CLAIM PROCESS FOR RETRENCHED
disclose more information. For example, the employees INDIVIDUALS
may request the employer’s audited financial statements,
Retrenched individuals who have been contributing
where the reason for the proposed retrenchment is for
cutting costs. to Unemployment Insurance Fund (UIF) may claim for
unemployment benefits. the amount of money that
SELECTION CRITERIA can be claimed: If one has worked for less than four

years, one may claim for one day for every six days
An employer ought in most cases to apply the selection
whereas if one’s contributions are more than four
criteria of last in first out (“LIFO”) subject to skills,
year’s one may can claim for a period of up to 238
qualifications and experience. It is the obligation of the
days. the maximum payout does not exceed 58% of
employer to try and place potentially affected employees in
one’s daily earnings.
the proposed new structure – on no account should existing
employees be treated as applicants for employment.
CODE OF GOOD PRACTICE ON DISMISSAL
BASED ON OPERATIONAL REQUIREMENTS
SEVERANCE PAY

Whilst applying the formulations of the statutory
An employer is required to consult with potentially
provisions, employers should keep a watchful eye on
affected employees on what a reasonable severance
the guidelines provided in the Code of Good Practice
package ought to be. Many employers have policies and
on Dismissal Based on Operational Requirements, as
past practices in this regard. The severance package
briefly outlined:
cannot be less than one week’s remuneration from each
completed year of service. An employee would also be The Code recognises the right of an employer to
entitled to notice pay in addition. dismiss (retrench) employees if the reason is based
on economical, technological, structural or similar
Many employers, particularly in smaller retrenchments,
needs.
areprepared to make an additional ex gratia payment
to an employee in full and final settlement of all claims The Code further recognise that retrenchment
relating to the employee’s termination of employment is categorised, as a ‘no fault’ dismissal i.e.
to obtain finality and to avoid the costs and time the employee is not responsible for the
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involved in litigation. termination of employment.