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Are all employees entitled to severance pay when their contract is terminated?
2016-02-04Staff Report 2 What is severance pay? Severance pay is often granted to employees upon termination of employment. It is usually based on length of employment for which an employee is eligible upon termination. Meaning, the total sum payable to an employee will depend on the number of years that he/she has been in continuous service with the employer and it is linked to the last salary in the job. The provision of severance pay exists in most countries around the world including Namibia. It is provided for in the legislation that regulates the relationship between employer and employee and is mandatory upon termination, depending of course on the surrounding circumstances that led to an employee’s termination. Purpose of severance pay As mentioned earlier, severance pay is triggered by termination of employment. Its purpose is to cushion the economic hardship that accompanies loss of employment. The payment of severance pay is made whether or not the employee gets another job. It can thus be concluded that severance pay is advocated for the maintenance of the welfare of employees when their employment contract ends. The maintenance of the welfare of employees is contained in Chapter 11, Article 95 of our Namibian Constitution which states that the State shall actively promote and maintain the welfare of the people by adopting, inter alia, policies aimed at the following: ensurance that workers are paid a living wage adequate for the maintenance of a decent standard of living and the enjoyment of social and cultural opportunities. Most of these policy aspects become the driving forces behind our statutory measures and acted as matrixes for formulating the laws that regulate employment relationships in our country. Severance Allowance under the Labour Act No. 6 of 1992 Two years after Namibia attained its independence, a number of legislations were passed. One of such legislation is the Labour Act with the mandate to make provision for the regulation of the conditions of employment of employees in Namibia and to offer protection to both employees and employers. Severance allowance as referred to in this Act is amongst the basic conditions of employment as provided for in the Labour Act. Section 52, states that severamce pay will be paid by the employer to the employee upon the termination of a contract of employment by an employer in respect of an employee who has at the time of such termination completed in terms of that contract of employment a period of at least 12 months of uninterrupted employment, or the termination of a contract of employment by an employee, at any time after he or she has attained the age of 65 years, who has at the time of such termination completed in terms of that contract of employment a period of at least 12 months of uninterrupted employment, This would mean that severance pay as provided for in the 1992 Labour Act will be paid when a contract of employment is terminated or when an employee is 65 years old when the termination has taken place, provided that such employee has been in employment for a period of 12 months consecutively. Severance pay under the Labour Act No. 11 of 2007 Fifteen years later, the 1992 Act was replaced by a new labour Act. Similarly to the old LA. of 1996, Section 35(1) of the new Labour Act also made provision for severance pay in the following instances; An employer must pay severance pay to an employee who has completed 12 months of continuous service, if the employee (a) is dismissed; (b) dies while employed; or (c) resigns or retires on reaching the age of 65 years. One important factor in the new Act is that it does not mention instances of contributions by the employer to a pension fund, or savings which is made on behalf of the employee by an employer. The 1992 Labour Act, states that, if such contributions towards a pension fund or any saving, is equal or more that the amount to be paid as severance, then severance pay was not obligatory. Another change in the 2007 Labour Act is that severance pay will not be paid if the dismissal was fair on grounds of misconduct and poor work performance. Provided, that the correct procedures to dismiss an employee have been followed. One will conclude that the legal drafters’ intent for the retirement age in terms of the provision of the Labour Act of 2007 to be at the age of 65. Again the question I ask myself is why is there a provision that contains a different retirement age to a particular group or class of employees? Elizabeth Nkole is Senior Labour Inspector in the Ministry of Labour, Industrial Relations and Employment Creation. She possesses Post-Graduate Diploma in Law (Conciliation and Arbitration) and a Bachelor of Laws Degree (LLB) Honours. 2016-02-04Staff Report 2
