Section 41(2) of the BCEA regulates the entitlement of an employee, dismissed for reasons based on the employer’s operational requirements, to severance pay.
In terms of s41(4) of the BCEA, an employee, who unreasonably refused to accept the employer’s offer of alternative employment with that employer or any other employer, is not entitled to severance pay ito s41(2).
How does the assistance provided by the retrenching employer to a retrenched employee affect such employee’s entitlement to severance pay?
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- Two schools of thought developed over the years in South Africa as to the purpose of severance pay. The first school of thought holds that an employee would be entitled to severance pay from the employer on the loss of employment – severance pay’s purpose is to compensate an employee for the loss of the accrued rights to a job, irrespective of whether, after the dismissal, the employee was unemployed. This school of thought reflects the general entitlement of an employee to seek severance pay, as encompassed in section 41(2) of the BCEA.
- The opposing school of thought is of the view that the purpose of severance pay is to tide the employee over after his dismissal, in his efforts to search for another job – consequently, severance pay received is influenced by the period of unemployment. The period of unemployment and the reason for such unemployment are important factors when applying the second school of thought.
- Section 41(4) of the BCEA, indicating that an employee, who unreasonably refuses to accept an employer’s offer of alternative employment with that employer or any other employer, is not entitled to severance pay, reflects the second school of thought.
- In Khanya Cleaning Group (Pty) Ltd v SA Transport and Allied Workers Union (2025) 36 SALLR 448 (LC) (Khanya Cleaning), the labour court made it clear that the purpose of s41(4) of the BCEA is to incentivise employers to secure alternative employment – the extent to which the retrenching employer secures alternative employment will ultimately determine whether or not there is a duty on the employer to pay severance pay to the retrenched employee.
- In analysing the undertakings of retrenching employers, with reference to the applicable case law, the following scales can be identified:
Upper-end of the scale undertaking
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- if the retrenching employer arranged alternative employment and if it was accepted by the retrenched employee, alternatively not so accepted, then there is no entitlement to severance pay
- see: Irvin & Johnson v CCMA (2006) 27 ILJ 395 (LAC) (Irvin & Johnson), referred to with approval in Astrapak Manufacturing Holdings v Chemical, Energy, Paper, Printing, Wood and Allied Workers Union [2013] 12 BLLR 1194 (LAC) (Astrapak)
Middle-end of the scale undertaking
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- it is not a requirement to escape the responsibility of paying severance pay that the retrenched employer concludes an agreement with the recruiting employer that it will employ the retrenched employees at the same level of remuneration
- see, further, Servest Landscaping Turf Maintenance (Pty) Ltd v SACCAWU (2023) 44 ILJ 380 (LC) (Servest), so guided by Vergenoeg vir Seniors v Stone [2010] ZALAC 35 (Stone)
Lower-end of the scale undertaking
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- introducing an employee to the recruiting employer and providing a reference is facilitation and not arrangement of alternative employment and, therefore, the employer is still obliged to pay severance pay to such employee
- see, further, Fidelity Supercare Cleaning v Busakwe NO and Others [2010] 3 BLLR 260 (LC) (Fidelity Supercare)
- In Khanya Cleaning, the labour court undertook an extensive interpretation exercise of the aforesaid three levels of assistance guided by an employer and came to the following conclusions:
Upper-end of the scale undertaking
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- Irvin & Johnson does not elevate to a principle that, to escape paying severance pay, the employer must negotiate a deal that entails an offer of alternative employment
- this viewpoint was based on the specific facts in casu
Middle-end of the scale undertaking
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- the approach adopted in Servest merely entails that an employer ‘must not sit on its hands and passively watch the world go by’
- it must actively assist the recruiting employer in dealing with the retrenched employees
Lower-end of the scale undertaking
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- again, Fidelity Supercare does not elevate to a principle that only facilitation is established if alternative employment does not lead to the consequences that the retrenching employer must still pay severance pay (and, obviously, also is not elevated to a principle that the obligation to pay severance pay only falls away when the employer makes the aforesaid arrangement)
Food for thought
- The viewpoint is held that the retrenching employer, in order not to pay severance pay ito s41(4) of the BCEA, needs to, at least:
- attempt to find potential recruiting employers
- if such potential recruiting employers are interested in employing the retrenched employees, the retrenching employer should assist in this process by, inter alia, providing information, making arrangements for meeting, providing input in the process, etc
- the extent of compliance with the requirement of ‘not sitting on its hands’ will be determined by the specific facts of each case, but, essentially, what the retrenching employer aims for is for the recruiting employer to hold the viewpoint that, without the retrenching employer’s input and assistance, it would not have been in a position to make the offer of alternative employment
