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Do you know what to pay your employee when he resigns?

by , 05 June 2013
Your employee's resigned. Do you know what you have to pay him? Read on to discover what you have to pay your employee when he resigns so you can effectively manage resignations in your workplace.

When an employee resigns, it can be a stressful time for you as an employer. Because now you need to find a replacement for your employee and get one of your staff members to take on extra work while you wait for your new employee to start.

But knowing how to effectively manage this process can make things easier for you and prevent your employee's resignation from affecting company productivity.

But there's one part of your employee's resignation you probably haven't thought of yet and it revolves around understanding what he's legally entitled to receive as part of his termination pay.

Here's what you have to pay your employee when he resigns

According to the Labour Law for Managers Loose Leaf Service, termination pay usually refers to the following:

  1. Notice pay: The money you'll pay your leaving employee for the period of notice that either he or you give, as required by law or as provided for in his employment contract.
  2. Leave pay is money you'll pay in place of leave owing to him that he hasn't taken at the date his employment ends. This is also known as accrued annual leave.
  3. Severance pay is money you'll pay to your employee, as required by law, if you terminate his service due to operational requirements. If you need to retrench and want to avoid the whole process, you and your employee can agree to a retrenchment package. This will be paid on condition that the employee resigns after severance pay's been agreed.

It's important to keep in mind that not all types of termination pay are relevant when your employee resigns. For instance, an employee who resigns won't be entitled to severance pay. This is because his services aren't being ended for operational requirements. In the same way, 'an employee who leaves without giving notice won't be entitled to receive notice pay' explains the Loose Leaf. You can also agree with your employee that he'll leave immediately and won't be paid in lieu of notice.

But there's more to termination pay…

Another important factor when it comes to termination pay is that, you still have to pay your employee the following when he resigns:

  • Salary or wages due to your employee for work done. For example, pay for the last week or month he worked;
  • Commission due to your employee for work done;
  • Payment for overtime already worked or work that's been done on a Sunday; and
  • Payouts due to your employee from a pension or provident fund.

Knowing what you have to pay your employee when he resigns will help you manage all aspects of his resignation more effectively.

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