HR Information for South Africa - termination of employment

Overview 

The Basic Conditions of Employment Act 75 of 1997 regulates working time, leave, termination of employment, recordkeeping, and prohibition of child labor in South Africa. The Labour Relations Act governs freedom of association, collective bargaining, strikes and lockouts, and other forms of industrial action.

Discrimination and affirmative action issues are regulated by the Employment Equality Act.

Termination 

Termination by Employer 

The Basic Conditions of Employment Act outlines the minimum written notice or payment due to an employee when the employment relationship is terminated. Such notices are not required if the employee engages in gross misconduct. The timing of the termination notice depends on the employee’s tenure. Individuals who have worked at a company for six months or less must receive at least a one-week notice of termination; for more than six months but not more than one year, a two-week notice; and for more than one year, a four-week notice, although the law allows collective bargaining agreements to reduce four-week notice requirements to two weeks. Instead of providing employees with a termination notice, an employer can reimburse workers for the amount of money they would have received had they worked during the designated notice period. Employers must provide terminated employees with a certificate of service containing such information as the start and end dates of employment, job title, a description of the work performed and the salary or wage at the date of termination.

Under the Labour Relations Act, a dismissal is legitimate if it is based on employee misconduct, incapacity due to ill health, or poor performance or on an employer’s operational requirements such as the need to close, downsize, or restructure its business. Misconduct that can lead to an employee’s dismissal includes gross dishonesty, gross insubordination, willful endangerment of the safety of others, racist conduct, and sexual harassment. Workers who feel they were fired unjustly can sue the employer under the Labour Relations Act. If a dismissal is deemed unfair, the worker can get his or her job back or receive compensation of up to 24 months’ remuneration. Employees who leave a job because the employer made the atmosphere intolerable can claim constructive dismissal, and employees who believe they have been discriminated against can sue for damages under the Employment Equity Act.

Plant Closings and Mass Layoffs 

When employers seek to downsize or restructure, they must disclose in writing all relevant details about the plan and consult with a union, a workplace forum, or the employees or their representatives. Topics of consultation include:

• avoiding or minimizing layoffs,

• changing the timing of layoffs,

• reducing the effects of layoffs,

• choosing which workers to lay off and

• severance pay.

The employer must provide information on:

• reasons for intended layoffs,

• why a specific layoff method will be used,

• how many workers are employed,

• how many workers will be laid off,

• how many workers were laid off in the previous 12 months,

• when layoffs will take place,

• what assistance the employer intends to give laid-off workers, and

• possible reemployment.

If relevant information is not provided, employees who are laid off might be eligible for compensation.

The employer is obliged to seek out ways and means of avoiding layoffs. Prior to selecting employees to be laid off, the employer must first try to agree with the union on the criteria to be used.

Payment on Termination 

At termination, employers must pay workers for any leave or compensatory time they have earned but not yet taken. When workers are dismissed because a company is downsizing or restructuring, the employer must pay severance equal to at least one week’s remuneration for each full year of completed service, although employees who “unreasonably” refuse an employer’s offer of alternative employment lose the right to severance pay.

Unemployment Insurance 

Workers who have lost their jobs, are unemployed for more than 14 days, and are willing and able to work are entitled to benefits from the Unemployment Insurance Fund, which was created to provide unemployment benefits to people who temporarily are not working, including those who are on maternity leave or in the process of adopting a child. The duration of benefits depends on the person’s contributions to the fund.

Employers and workers are required to contribute monthly to the Unemployment Insurance Fund. Workers contribute 1 percent of their pay to the fund, and their employers provide a matching 1 percent.

This benefit is not available to individuals who work fewer than 24 hours a month, students, government employees, foreigners working on contract, retirees who receive a monthly state pension, or individuals who work on commission.

Reference Citations 

Termination by Employer: Basic Conditions of Employment Act, No. 75 of 1977, § 37 ; Labour Relations Act, No. 66 of 1995, § 188

Plant Closings and Mass Layoffs: Labour Relations Act, No. 66 of 1995, § 189

Payment on Termination: Basic Conditions of Employment Act, No. 75 of 1977, §§ 38, 40-41

Unemployment Insurance: Unemployment Insurance Act, No. 63 of 2001, §§ 12-13

Personal Taxes 

Residency Requirements 

South Africa conducts two tests for determining whether an individual is a resident for tax purposes:

• The ordinarily resident test assesses whether a person considers South Africa to be his or her principal residence, which could be described, in comparison to other countries, as the individual’s real home. Persons not ordinarily resident in South Africa would only be considered to be resident for South African tax purposes by virtue of their physical presence in South Africa.

• Under the physical presence test, an individual is deemed to be resident for tax purposes if he or she is physically present in South Africa for a period exceeding 91 days in total in each of the current and previous five tax years and more than 915 days in total during the previous five tax years.

If a person who is deemed to be a resident under the physical presence test leaves South Africa for a continuous period of 330 full days, he or she is deemed to be no longer resident from the first day of the 330-day period.

An individual considered to be a resident of another country by virtue of a tax treaty cannot also be a resident of South Africa.

Taxable Income 

South African residents are taxed on their worldwide income wherever earned. Nonresidents are taxed only on income from South African sources.

Tax Rates 

Income tax rates are levied on a progressive scale, with rates ranging from 18 percent to 45 percent.

Employers and employees are also required to make Unemployment Insurance Fund contributions of 1 percent on compensation up to a fixed amount.

Reference Citations 

Residency Requirements: Income Tax Act, No. 58 of 1962

Taxable Income: Income Tax Act, No. 58 of 1962

Tax Rates: Rates of Tax for Individuals

References 

Laws and Regulation 

Acts Online (South African legislation)

Basic Conditions of Employment Act

Constitution of the Republic of South Africa

Employment Equity Act

Labour Relations Act and Amendments

Pension Funds Act

Tobacco Products Control Act, 1993

Unemployment Insurance Amendment Act

Unemployment Insurance Contributions Act

Government Websites and Publications 

Government Codes of Good Practice 

Arrangement of Working Time

Disability in the Workplace

Integration of Employment Equity into Human Resource Policies and Practices

Key Aspects of HIV/AIDS and Employment

Department of Labour Basic Guides 

Basic Conditions of Employment

Compensation for Occupational Injuries and Diseases

Employment Equity

Employment of People with Disabilities

Health and Safety Committees

Labor Relations

Private Employment Agencies

Public Holidays

Unemployment Insurance Fund