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If, like AngloGold Ashanti, you're retrenching make sure you follow your legal severance pay obligations

by , 13 November 2014
According to Business Day, AngloGold Ashanti (AGA) has become the third gold miner in recent months to start talks with unions and employees on retrenchments, against a backdrop of weakening gold prices and rising costs.

Last month, Sibanye Gold said it was holding talks about potential retrenchments at its Cooke 4 shaft and, in August, Harmony Gold put its Target 3 operation on care and maintenance and started consultations on possible job losses.

If, like AngloGold and these two other gold producers, you're going through a hard time and are retrenching, you must follow your legal severance pay obligations.

Read on to find out what they are so you can comply with the Basic Conditions of
Employment Act (BCEA) and avoid disputes.

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Here are your legal obligations when it comes to severance pay

According to the Labour Law for Managers Loose Leaf Service, Section 41 of the BCEA requires you to pay at least the prescribed minimum amount of severance pay to retrenched employees.
The statutory minimum is one weeks' remuneration for every completed year of continuous service.
You must calculate statutory severance pay on remuneration and not your employee's basic salary. Bear in mind that remuneration is all benefits including wages, car allowances, housing allowances etc.

You also have a legal duty to consult properly when dealing with severance pay

You can't just say from the start you're going to pay the statutory minimum and no more.
You must allow the union or employees to make proposals that you pay more and you must consider and deal with the proposals.
You'll have to pay more if you're bound by a collective agreement that provides for more. And you may have to pay more if you have a policy that provides for more or if have a precedent of paying more in previous retrenchment exercises.

When it comes to severance pay, always remember what the courts have said in the past

Previously, our courts have said Section 41 of the BCEA only applies when you're paying the statutory minimum. If you pay more, you can use whatever formula you like as long as your employee isn't worse off than he would be under the statutory minimum.
Now that you know your legal severance pay obligations, comply with the BCEA and avoid disputes.
PS: For more information on retrenchment, check out Retrenchments: How to make sure your retrenchment process is 100% correct.

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