PAYMENTS ON TERMINATION OF EMPLOYMENT – A TAXING AFFAIR!
On termination of employment, there are certain payments that must be made to employees by the employer. Some of these payments are required in terms of legislation while others may be required in terms of the employee’s employment contract. Termination payments usually include:
- salary until last day of work;
- payment in lieu of notice if the employee is not required by the employer to work his/her notice period, as provided in the employment contract (and unless the employee’s services are terminated summarily (without notice), typically in dismissals for gross misconduct);
- payment in respect of annual leave that has accrued to the employee but is untaken as at the date of termination; and
- pension or provident fund benefits in terms of fund rules.
Other termination payments may include, for example, a pro rata 13th cheque or bonus. This depends on whether it is company policy or practice for the employer to pay a pro-rated 13th cheque or bonus where an employee’s services are terminated part way through the year.Read further