What the law says about severance pay in South Africa

 ·18 Feb 2023

Employees are not entitled to severance pay when they are relieved of their duties if they unreasonably reject alternative employment.

Recent data suggest that South Africa has a 68% chance of entering a recession, which could lead to widescale retrenchments across the nation.

Retrenchments could see many employees dismissed from their jobs; however, not all employees are legally entitled to severance pay.

Jacques van Wyk, Michiel Heyns, and Danelle Plaatjies from Werksmans Attorneys highlighted the case of Servest Landscaping Turf Maintenance v SACCAWY (2022) that dealt with a case where employees dismissed for operational requirements were not qualified for severance pay.

According to Werkmans Attorneys, section 41(4) of the Basic Conditions of Employment Act (BCEA) states that an employer can refuse to pay their dismissed employees if they unreasonably refuse to “accept the employer’s offer of alternative employment with that employer or any other employer”.

In a recent case, the labour court (LC) looked into the use of section 41(1).

The court reaffirmed that the requirements of section 41(4) are satisfied if the dismissed employee is offered alternative employment with a new employer due to the retrenching employer’s actions, said Werkmans Attorneys.

In a previous case – Irvin & Johnson Ltd v Commission for Conciliation, Mediation & Arbitration (CCMA) & others (2006), the Labour Appeal Court (the LAC) stated that the legal purpose of severance pay is to help support the retrenchee while they search for a new job.

However, a retrenchee who gets another job immediately would not be entitled to severance pay as they have found employment.

The LAC also said that the BCEA rewards employers who find alternative employment for their retrenched employees.

However, a dismissed employee who is offered alternative employment but the offer is not made via their retrenching employer is still entitled to severance pay – even if they refuse the alternative employment opportunity.

In addition, an employee found to have reasonably refused alternative employment will still be entitled to severance pay.


In the Servest case, the CCMA said that Servest failed to prove that it was responsible for finding 22 employees alternative employment at Bidvest.

The CCMA found that Servest, at most, played a facilitating role and did not secure employment for the dismissed employees.

Servest took the matter to the LC, which found that the arbitrator made an error of law, leading to a disregard of material evidence.

The evidence suggested that Servest initiated the meetings with Bidvest and kept a close eye on Bidvest’s recruitment of its staff to ensure that no employee would be left unemployed or lose a day’s work.

The LC said that the CCMA made an error of law in finding that only a binding undertaking by Servest from Bidvest could prove Servest secured alternative employment for its dismissed staff.

The LC set aside the CCMA’s ruling and stated that the employees were not entitled to severance pay according to section 41(4) of the BCEA.

Ultimately, a dismissed employee cannot expect a severance package if they found alternative employment through the efforts of their retrenching employer, but the retrenching employer must have evidence that they played an instrumental role in the process.

Read: What the law says about severance pay in South Africa

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