What happens to your pay in South Africa if your boss dies

Employees in South Africa are not necessarily entitled to financial relief if their employer dies.

Nasheetah Smith from Werksmans Attorneys said that sole proprietors or employers who conclude contracts of employment in their personal capacities are the sole force behind their business.

Their death can leave employees with questions over their rights and any entitlements owed to them, with question marks over severance packages.

Smith considers whether employees are entitled to severance packages upon the death of their employer.

Retrenchment

Firstly, sections 189 and 189A of the Labour Relations Act No 66 of 1995 (LRA) govern dismissals in terms of operation requirements.

However, Section 41(2) of the Basic Conditions of Employment Act (BCEA) states that employees dismissed for operational reasons are entitled to severance pay equal to at least one week’s remuneration for every year of employment with the employer.

Section 41(1) of the BCEA states that operational requirements refer to the economic, technological, structural, or similar needs of an employer.

Thus, severance pay is only payable when an employee is fired for operational requirements.

Severance Due Upon Death

The death of an employer does not necessarily terminate a contract of employment, which can remain valid in accordance with the provisions of the law of contract in cases.

“Furthermore, upon the death of the employer, the executor of the deceased’s estate assumes control over the deceased’s assets, including any employment-related matters,” said Smith.

“The exception to this principle is the case where the services are of a personal nature. In these instances, it is impossible to perform, and the contract is terminated on the death of the employer.”

“The death of the employer during the term of the contract terminates the contract because of the objective impossibility of performance.”

This issue occurred in the matter Meyers / Estate Late Dr Gordon [2022] before the Commission for Conciliation, Mediation and Arbitration (CCMA), where an employee’s services were terminated after the death of a medical practitioner with whom she worked.

The employee lodged a claim against the estate of the late employer for severance pay for 10 years of service and a 13th cheque.

“The CCMA held that an employee whose services were terminated by the death of their employer was not entitled to severance pay as the employment relationship terminated by operation of law and not for operational reasons,” said Smith.

“While severance pay is mandated for dismissals based on operational requirements under Sections 189 and 189A of the LRA, they do not apply in cases where the employment ends due to the death of the employer.”

“Employers who employ in their personal capacities should consider estate planning to ensure smooth transitions in the event of their passing, including addressing employment-related matters and potential obligations to employees.”

The employment contract should also state what remuneration (if any) is due if the employer dies.

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