The legal minimum for severance pay in South Africa is one week’s remuneration for every completed year of continuous service with the same employer. That figure comes from section 41 of the Basic Conditions of Employment Act and applies when you are dismissed for the employer’s operational requirements, in other words retrenched. Severance is paid in addition to your notice pay and your outstanding leave, not instead of them. An employer may agree to more, but may not pay less.
What a retrenchment package must include
- Severance pay: at least one week’s remuneration per completed year of service.
- Notice pay: either worked or paid out, according to the length of your service.
- Leave pay: all accrued annual leave not yet taken.
- Any contractual amounts: bonuses, commission or gratuities your contract or a collective agreement provides for.
- Your retirement fund benefit: paid by the fund, not the employer.
- A certificate of service: which the employer must issue on termination.
The retirement fund portion is separate money with its own rules, and it helps to understand the rules on when a fund must pay out before you decide whether to take cash or preserve it.
How severance pay South Africa law calculates the minimum
The formula is straightforward:
Weekly remuneration = monthly salary multiplied by 12, divided by 52.
Severance = weekly remuneration multiplied by completed years of continuous service.
Take someone earning R20,000 a month with six completed years of service. Their weekly remuneration is about R4,615, so the minimum severance is roughly R27,692.
Two points are commonly missed. First, “remuneration” is calculated under section 35 of the BCEA and can include the cash value of certain benefits, not only basic salary. Second, section 84 treats service as continuous where a break was shorter than one year, so an earlier stint with the same employer may count.
Only completed years count. Eleven months of service in the final year adds nothing to the statutory minimum, though an employer may agree to pro-rate it.
Notice periods
| Length of service | Minimum notice |
|---|---|
| Six months or less | 1 week |
| More than six months but less than one year | 2 weeks |
| One year or more | 4 weeks |
| Farm and domestic workers employed more than six months | 4 weeks |
Notice must be given in writing. An employer may pay you the remuneration you would have earned during the notice period instead of requiring you to work it.
When severance can be withheld
Section 41(4) is the exception most people are not warned about. If you unreasonably refuse an offer of alternative employment, whether with your own employer or another one, you lose the entitlement to statutory severance pay.
Whether a refusal was reasonable depends on the facts, including pay, location, seniority and travel. Put your reasons for refusing in writing at the time rather than relying on memory later.
Small retrenchments and large ones
A retrenchment consultation runs under section 189 of the Labour Relations Act. Larger ones fall under section 189A, which adds CCMA facilitation and longer minimum timelines. Section 189A applies to employers with more than 50 employees where the number to be dismissed reaches these levels:
| Employer headcount | Section 189A applies from |
|---|---|
| Up to 200 employees | 10 dismissals |
| More than 200 but not more than 300 | 20 dismissals |
| More than 300 but not more than 400 | 30 dismissals |
| More than 400 but not more than 500 | 40 dismissals |
| More than 500 employees | 50 dismissals |
Dismissals for operational requirements in the preceding 12 months count towards these numbers. Where a facilitator is appointed, the employer may only issue termination notices once 60 days have passed since the section 189(3) notice. Where no facilitator is appointed, section 189A(8) provides for a 30-day period.
How a retrenchment package is taxed
Severance benefits are taxed on their own SARS table, separately from your salary. For the 2027 tax year, running from 1 March 2026 to 28 February 2027, the rates are unchanged:
| Severance or retirement lump sum | Rate of tax |
|---|---|
| R1 to R550,000 | 0% |
| R550,001 to R770,000 | 18% of the amount above R550,000 |
| R770,001 to R1,155,000 | R39,600 plus 27% of the amount above R770,000 |
| R1,155,001 and above | R143,550 plus 36% of the amount above R1,155,000 |
The R550,000 band is cumulative over your lifetime, not per event. SARS aggregates severance benefits accruing from March 2011, retirement fund lump sum benefits from October 2007 and withdrawal benefits from March 2009. If you have already used part of it, less remains.
Notice pay, leave pay and bonuses do not go on this table. They are taxed as ordinary income at your marginal rate, which is why the amount that lands in your account is often lower than people expect.
If you also draw from your retirement savings at this point, check how the two-pot retirement system works first, because savings-pot withdrawals are taxed differently again.
Common problems
The package looks lower than promised. Compare the offer against the statutory minimum first, then against your contract or the applicable collective agreement, which may provide two or three weeks per year.
Your final year was almost complete. Only completed years count under the BCEA. Raise pro-rating during consultation, not afterwards.
The employer says notice replaces severance. It does not. Both are owed where a retrenchment is genuine.
Only the severance amount is in dispute. Section 41(6) allows that specific dispute to go to a bargaining council with jurisdiction, or to the CCMA where none applies.
You think the dismissal itself was unfair. An unfair dismissal dispute is generally referred within 30 days of the date of dismissal. The CCMA call centre is 0861 16 16 16.
You have no income while this runs. Lodge your unemployment claim without waiting for the dispute to resolve. Southafriworld sets out how to claim UIF online step by step.
Frequently asked questions
How much severance pay am I entitled to?
At least one week’s remuneration for each completed year of continuous service, unless your contract or a collective agreement gives you more.
Do I get severance pay if I resign?
No. Severance under section 41 applies to dismissal for operational requirements or certain insolvency terminations.
Is severance pay taxed?
The first R550,000 of your lifetime severance and retirement lump sums is taxed at 0%. Amounts above that are taxed on a sliding scale.
Is notice pay included in the tax-free amount?
No. Notice pay and leave pay are taxed as normal income at your marginal rate.
Can I claim UIF after retrenchment?
Yes. Retrenchment is a qualifying reason for unemployment benefits, subject to your accumulated credits.
Does part of a year count?
Not for the statutory minimum. Only completed years of continuous service are counted.
What to watch
The severance amount in section 41(2) can be varied by the Minister of Employment and Labour through a notice in the Government Gazette, after consulting NEDLAC and the Public Service Coordinating Bargaining Council. No such variation was in force at the time of writing. Also watch the annual Budget in February for changes to the retirement and severance lump sum table, which has held at a R550,000 tax-free band since 1 March 2023, and the annual review of the current national minimum wage, which shifts the base that low-earning workers’ packages are calculated from.
