Severance pay is taxable
I can't believe the $%$#ing taxman even takes a chunk of your severance pay when you are out on the street. It's sickening!
I too was retrenched. Termination pay usually includes outstanding leave pay, 1 week severance for each year worked, etc. The employer must apply to Sars for a
tax directive, which tells him how to treat the income tax deduction. Note severance amounts are taxed under a separate section to leave and pension payouts.
If the now former employee feels he has reason to dispute the retrenchment, e.g. unfairly retrenched, and takes it to the CCMA and/or Labour Court and is successful, the settlement received is subject to
further income tax deductions even if the settlement is received in the following tax year(s).
However, any legal costs in pursuing the settlement are tax deductible.
Retrenchment is "no fault" but must follow s180-something of the Labour Relations Act. However, "retrenched" posts are frequently readvertised with only the job titles different or affected employees asked if they want to continue working but without a contract. This is not true job reductions for "operational reasons". So many sins are being hidden under the rubric of retrenchment.
Out of the blue I was told I was been retrenched. In that small concern, i and other senior staff - professionals who ran the place - were ignorant of the alleged operational reasons and restructuring behind it. Financially, the organisation was fine. I was the first ever to be retrenched, and when I asked if others were been targeted, told possibly. That was a lie.
The LRA says retrenchment must be a "last resort" and the retrenched person's duties cannot be outsourced - then it's not retrenchment - and alternative openings must be evaluated within the company during "meaningful consultations" that precede the final determination. The onus is on the employer to prove retrenchment is the only option and must provide full details to affected employees during consultations.
In my case, as in many, I'm sure, the decision to retrench had been made
prior to any consultations; fait accompli. No alternative post, even at a lower salary, was offered, despite me suggesting options because they needed someone to fill my duties. They were admanant they would employ someone else - later they got 2 people to fill my duties and outsourced an aspect to a consultant. I was dismissed (retrenchment is involuntary or forced dismissal) eventually. I informed them I would take it to the Labour Court, which I did at eye-watering cost. Nevertheless, they were surprised. The matter was settled just before trial.
To cut a long story short, people affected by retrenchment must know their rights - info is on the internet; question employers about the rationale for retrenchment and ensure meaningful consultations takes place prior the final determination. Somewhere on a mybroadband forum on this topic someone said "the CCMA does not consider retrenchment; go to the Labour Court". The CCMA does if it the applicant considers it to be unfair dismissal. Anyway,
applicants must first approach the CCMA (conciliation and arbitration or conciliation only) before approaching the Labour Court on any dispute, if the parties so wish - the Court will not hear the matter otherwise.
Are CCMA commissioners up to the task? Chamber of Mines in the platinum dispute mediator recently complained they're not. The commissioner in my conciliation hearing was biased and incompetent. So even during the hearings, parties must ensure they know their rights as some commissioners, in my view, want to pressure one or other side so that they can sign off another "successful" hearing, but not necessarily in the parties' interests.
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