Severance Pay Calculator South Africa
Updated for the 2025/26 tax year · SARS & BCEA aligned · Free, no sign-up
Free South African severance pay calculator. Estimate the minimum retrenchment package under section 41 of the BCEA — one week's pay per completed year of service.
Related: payroll software South Africa · SARS-compliant payroll · cloud payroll software South Africa · payroll guides
Severance calculator
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Severance pay in South Africa — the rules
Section 41 of the BCEA requires an employer who dismisses an employee for operational requirements (retrenchment) to pay severance of at least one week's remuneration for every completed year of continuous service. This is the statutory minimum — contracts, company policy or bargaining council agreements often require more.
What counts as severance
A full retrenchment package generally has four components:
- Severance pay — 1 week per completed year (BCEA minimum).
- Notice pay — 1, 2 or 4 weeks per BCEA section 37.
- Outstanding leave — accrued but untaken annual leave.
- Pro-rata 13th cheque / bonus if the contract provides one.
Tax on severance
The first R550,000 of a severance benefit is tax-free (lifetime — combined with retirement lump sums). Amounts above are taxed on the retirement lump sum table:
- R0 – R550,000 — 0%
- R550,001 – R770,000 — 18%
- R770,001 – R1,155,000 — 27%
- Above R1,155,000 — 36%
Notice pay, leave pay and pro-rata bonuses are taxed as ordinary income — they don't get the R550,000 exemption.
Section 189 process
Before any retrenchment, the employer must follow a fair consultation process: give written notice, share info on reasons, alternatives, selection criteria and severance formula, consider employee submissions, and only then finalise. Skipping this makes the dismissal procedurally unfair — the CCMA can order reinstatement or up to 12 months' compensation.
Refusal of alternative work
If the employer offers reasonable alternative employment and the employee unreasonably refuses, the employee forfeits severance. "Reasonable" is judged on comparable pay, location and duties.
Related payroll guides
Frequently asked questions
Do part-years of service count?
The BCEA says 'completed years' — only full years. Many employers voluntarily pro-rata the final year.
Is severance taxed?
The first R550,000 is tax-free (lifetime, combined with retirement lump sums). Amounts above are taxed on the SARS retirement lump sum tables.
What if my contract says more than 1 week per year?
The higher amount applies. The BCEA is a minimum, not a ceiling.
Can I claim UIF after retrenchment?
Yes — retrenchment qualifies for unemployment benefits. Submit UI-19 and UI-2.7 forms via uFiling.
Is my severance protected if the company is insolvent?
Employees are preferred creditors up to a limit under the Insolvency Act. The UIF may also pay illness/unemployment benefits.
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