According to the Practical Tax Loose Leaf, termination pay is payment legally due to your employee when he leaves your company.
This means you'll need to calculate and pay termination pay to your employee when:
But to ensure this process runs smoothly and your calculations for termination pay are accurate, you need to check the following:
Six things to consider before you pay your employee termination pay
#1: Establish whether or not your employee is entitled to termination pay and, if so, what types:
#2: Calculate the employee's total remuneration taking into account factors like commission, pension contribution and free accommodation.
#3: Make sure you know accurately how much notice pay (refer to the employment contract or the BCEA), leave pay (how many days he has accrued) and severance pay (how much service he has) the employee has due to him.
#4: Then work out the actual amount of notice, severance or leave pay that you must pay based on his total remuneration.
#5: Add up the notice, severance and leave pay figures to arrive at the total termination pay figure.
#6: Prepare and submit an application for a tax directive to SARS in terms of the form IRP 3(b).
Make sure to check these factors to ensure you're withholding the correct amount of employees' tax when paying your employee termination pay.