• September 25th, 2020

Severance pay or pension payout?

Special Focus, National
Special Focus, National

As noted in my previous article, employees in the public sector are retired at the age of 60 without benefiting from the payment of severance pay, but in terms of the Labour Act an employee can work until the age of 65 and retire or resign at such age and still benefit from the payment of severance pay. The mandatory retirement of civil servants in the Public Service Act appears to be discriminatory for the reason that severance pay benefit is only afforded to those who retire or resign at the age of 65, as well as those who are dismissed from employment in circumstances provided for in the Labour Act. In order to preserve the principles of equity, there is an urgent need for the Minister of Labour, Industrial Relations and Employment Creation to make a declaration in the Government Gazette in terms of Section 2 (3) of the Labour Act 2007. This is necessitated by the fact that Section 35 appears to be discriminatory, because it does not address the issue of when an employee’s contract of employment is terminated as a result of a mandatory retirement. Section 2 (4) of the Labour Act 2007 provides that: (4) If there is a conflict between a provision of this Act and a provision of a law listed in subsection (5), in respect of which the Minister has not made a declaration contemplated in subsection (3) – (a) The provision of that other law prevails to the extent of the conflict, if it is more favourable to the employee; or (b) the provision of this Act prevails to the extent of the conflict, in any other case. Instead of placing civil servants in a position where they are left to wonder whether they are governed by both the Labour Act and the Public Service Act legislators are supposed to make specific reference in Section 35 of the Labour Act, that it does not apply to civil servants and provide reasons. The government can for example justify its exclusion of public servants from benefiting from the provision of severance pay by indicating that the government already makes provision for public servants when they retire from office by making monthly contributions towards their monthly pension contributions. There is clearly a need for law reform to address the question whether the Labour Act governs public servants, and if so, why the Act provides for a different retirement age. If the answer to the question is ‘no’, then why does the Labour Act not strictly stipulate that certain categories of employees are not covered by the Labour Act? The Labour Act can be amended so that it adequately addresses the issue of severance pay of retired civil servants so that it either specifically excludes civil servants or the retirement age should be set at the age of 60, so that the Labour Act and the Public Service Act are on par, as they both deal with conditions of employment of workers. On the other hand, perhaps one will have to determine whether it is to the advantage of an employee in the public sector to retire at 65 years or to retire early. If it is an advantage to retire at 60 years, then the provision of the Public Service Act of 1995 would apply. On the other hand, if it is a disadvantage for the employee to retire at 60, then the provisions of the Labour Act of 2007 would prevail. I view severance pay as a means of complimentary and or payment in gratitude for the years that an employee has worked for the employer. Thus in the case of employees who do not receive this payment - specifically civil servants - it appears the government does not give them any payment as a form of gratitude. Rather they must access their pension money to which they have been contributing throughout their years of employment in the public sector. Perhaps when the legislators drafted the Public Service Act, the reason to retire public servants earlier and the decision to exclude them from benefiting from severance payment was because government incorporated that benefit into their pension fund. Hypothetically, if government were to take away the provision of pension from civil servants and provide them with severance pay, a lot of civil servants - including myself – would rather opt for the GIPF pension benefits, instead of severance pay, for the simple reason that GIPF offers better benefits, which are long-term, whereas the severance pay is a once-off payment. One could argue then that the government does provide assistance to their employees when they retire. Nonetheless, the question as to why civil servants are mandatorily retired at the age of 60 still remains an open one. Why the Labour Act makes provision for severance pay at the age of 65 only, still remains a mystery. * Elizabeth Nkole is a senior labour inspector in the Ministry of Labour, Industrial Relations and Employment Creation.
New Era Reporter
2016-02-17 10:18:12 | 4 years ago

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