Retrenchment package calculator

This calculator works out the smallest retrenchment package your employer may lawfully pay you. It adds up three things: severance pay, notice pay and the money owed for annual leave you have not taken. It is for employees in South Africa who have been told they are being retrenched, or who suspect a retrenchment is coming, and who want to check an offer before they sign anything.

The number it gives you is a floor, not a ceiling. Your contract, a company policy or a collective agreement may entitle you to more. The calculator applies the statutory minimums in the Basic Conditions of Employment Act 75 of 1997, which most people call the BCEA.

What this calculator works out and who it is for

Retrenchment is a dismissal for operational reasons. That means the employer is letting you go because of its economic, technological or structural needs, not because of anything you did. The law guarantees a minimum payout, and this tool calculates it.

You enter five things: your gross monthly salary, your years of continuous service (decimals are fine), the number of annual leave days you have accrued but not taken, whether you will be paid out for your notice or work it, and whether you are a general employee or a farm or domestic worker. The tool returns your weekly pay, the severance line, the notice line, the leave line and the total.

Use it if you are an employee facing retrenchment, a union representative preparing for a consultation meeting, or a small employer checking that an offer meets the legal minimum. It does not apply to independent contractors, who are not covered by the BCEA.

How the calculation works

The service follows a fixed sequence. Here it is, step by step, in the order the code runs it.

First, it converts your monthly salary into a weekly and a daily rate. Weekly pay is your monthly salary multiplied by twelve and divided by 52, the number of weeks in a year in the rate table. Daily pay is your monthly salary multiplied by twelve and divided by 260, which is the number of working days in a year for a five-day week. Both figures come from the BCEA settings in the LawMatch rate table.

Second, it works out severance pay. It takes your years of service and rounds them down to a whole number, because only completed years count. It multiplies that whole number by one week, the statutory rate per completed year, and then multiplies the resulting weeks by your weekly pay. If you have served less than one full year, severance is zero and the calculator shows a warning saying so.

Third, it works out notice pay. It converts your years of service into months and applies the same notice rules the notice period calculator uses: one week for six months or less, two weeks for more than six months up to a year, and four weeks after a year. A farm or domestic worker with more than six months of service gets four weeks. If you chose "paid out instead of working it", the calculator multiplies those weeks by your weekly pay and adds the result. If you chose "I will work my notice", the notice line shows zero because you will simply be paid your normal salary for the weeks you work.

Fourth, it works out your leave payout. It multiplies your untaken leave days by your daily rate.

Fifth, it adds severance, notice pay and leave pay together and rounds the total to the cent. That is the "minimum package" headline.

The calculator does not apply any cap on years of service, does not add a tax calculation, and does not add anything for a contractual or policy entitlement above the minimum. It also adds a standing warning that an employee who unreasonably refuses an offer of alternative employment may forfeit severance pay.

The law behind the numbers

Three parts of the Basic Conditions of Employment Act 75 of 1997 drive this calculator, and the rate table names the Act as its source. The severance rule says that an employer who dismisses an employee for operational requirements must pay at least one week's remuneration for each completed year of continuous service. The notice rule sets the minimum notice periods described above. The leave rule says that when employment ends, the employer must pay the employee for any annual leave that has accrued but has not been taken.

The retrenchment process itself is governed by the Labour Relations Act 66 of 1995. Before an employer may retrench, it must consult with you, or with your union, about ways to avoid the retrenchment, the selection criteria, the timing and the severance pay. The calculator does not test whether that process was followed. It only prices the outcome.

The BCEA figures in the rate table carry an effective date of 1 January 2019 and are reviewed whenever the Act changes. Always check the current position if your retrenchment is contested.

Worked example

This example is illustrative. Thandi earns a gross salary of R18 000 a month. She has worked for the same employer for seven and a half years, she has ten days of annual leave she has not taken, she is a general employee, and her employer will pay her out rather than have her work her notice.

Her weekly pay is R18 000 multiplied by twelve, which is R216 000, divided by 52. That comes to R4 153.85. Her daily pay is R216 000 divided by 260, which is R830.77.

Severance counts only completed years, so seven and a half years becomes seven. Seven weeks at R4 153.85 is R29 076.92.

Notice: seven and a half years is 90 months, which is well over a year, so she is owed four weeks. Four weeks at R4 153.85 is R16 615.38.

Leave: ten days at R830.77 is R8 307.69.

The minimum package is R29 076.92 plus R16 615.38 plus R8 307.69, which is R53 999.99, or roughly R54 000. Each line is rounded to the cent before the total is added, which is why it lands a cent short of a round number.

If Thandi's employer offered two weeks per year of service instead of one, her severance would double to about R58 154. The calculator will not show that figure. It shows the legal minimum only.

What the calculator does not include

The real amount you receive may differ from the calculator's figure for several reasons.

Tax is not shown. Severance pay is taxed on the retirement lump-sum tables, under which a cumulative lifetime amount is tax-free. At the time the rate table was last reviewed that amount was R550 000, but SARS adjusts these tables, so check the current figure with SARS or a tax practitioner. Notice pay and leave pay are taxed as ordinary income.

Your contract, a company policy or a collective agreement may give you more than one week per year, a longer notice period, or extra benefits such as a pro-rata bonus. If it does, that better term applies, not the statutory minimum.

The calculator uses gross monthly salary as remuneration. In law, remuneration for severance purposes can include the value of regular allowances and certain benefits, so a monthly housing or car allowance may need to be included.

Bonuses, provident or pension fund payouts, UIF benefits, and any settlement your union negotiates are all outside the calculation.

Finally, the calculator assumes a five-day working week. If you work a six-day week, your daily rate, and therefore your leave payout, will be calculated on a different basis.

When to get advice

Get advice if any of these apply to you.

Your employer says there will be no severance, or offers less than one week per completed year. Read our guide on whether an employer can retrench you without paying severance.

You were not consulted before the decision was made, or you were consulted after the decision was already final. A flawed consultation process can be challenged at the CCMA, the Commission for Conciliation, Mediation and Arbitration. A dispute about the fairness of a retrenchment must usually be referred within 30 days of the dismissal.

You are being asked to sign a settlement or a "mutual separation" agreement. A full and final settlement is very hard to undo.

You suspect the retrenchment is a cover for getting rid of you for another reason, for example because you complained about something or because you are pregnant.

The free route is the CCMA. Referring a dispute is free and you may represent yourself. If your dispute concerns only the amount of severance pay, the CCMA can arbitrate it. If you cannot afford an attorney, Legal Aid South Africa on 0800 110 110 may be able to help. See our legal aid page for how to qualify.

Remember also to claim UIF. Our guide on how to claim UIF after being retrenched explains the steps and the twelve-month deadline. If your leave payout looks wrong, read do I get paid for unused leave when I leave a job.

LawMatch is not a law firm and this page is general information, not legal advice. Use the figure as a starting point and confirm it with your union, the CCMA or an attorney before you make decisions.

Frequently asked questions

Does severance pay start from my first day?

No. Statutory severance is paid per completed year of continuous service. If you have worked for eleven months, the minimum is zero. At one year and eleven months, the minimum is one week. The calculator rounds your years down for this reason.

Do I still get notice pay if I work my notice?

If you work your notice you are paid your ordinary salary for those weeks, so there is no separate notice payout. The calculator shows the notice line as zero when you pick "I will work my notice". If the employer tells you to leave immediately, you must be paid out for the notice period instead.

What if my employer offered me another job and I said no?

If the offer was reasonable and you refused it without good reason, you may lose your right to statutory severance. What counts as reasonable depends on the pay, the location, the hours and your circumstances. Get advice before turning down an alternative position.

Is the severance figure taxed?

Yes, but favourably. Severance benefits fall under the retirement lump-sum tax tables, which allow a cumulative tax-free amount over your lifetime. Your employer must apply for a tax directive from SARS before paying you.

Can my employer pay less than the calculator shows?

Only in narrow cases. The BCEA minimum applies unless a bargaining council agreement or a ministerial variation provides otherwise, which is rare. An employer in financial distress cannot simply decide to pay less. If you are offered less than the minimum, refer the dispute to the CCMA.