Categories

Employee Exits

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Employee Exits

Blueprint Summary

The Employee Exit Process commences as soon as it is confirmed that the employee’s contract of employment is due to be terminated. The termination of the contract can only be as a result of the following categories: (note that this Blueprint details the process of changing the employee’s record to inactive and does not cover the procedural aspects of terminations).

  • Business Closed / Insolvent
  • Deceased
  • Dismissed for misconduct
  • End of Fixed Term Contract
  • Medical Incapacity
  • Mutual Separation
  • Resigned
  • Retired – early
  • Retired – normal
  • Retrenched Involuntary
  • Retrenched Voluntary
  • Transferred in Group
  • Transferred payroll

The above Termination Reasons serve as a general guide and Divisions should always refer the HR Naming Conventions for all approved conventions to be used. Approved Naming Conventions will also always be aligned in the PSIber 2.0 System. 

Process flow

Process Specification

Process Owner

Stakeholder(s)

Recording Requirements

Storage Requirements

Reporting Requirements

Audit Requirements

Notifications

Reminders

Transparency & Communication

Knowledge & Skills

System

Workflows

Legislation & Governance

Templates, Forms, Guides and Work Instructions


THE Process

The Process

• Employment contract
• Termination Notification.
• Employee Exit Checklist
• Termination Pack containing specified documentation
• Employee Movement Form

• Termination of the employee on the payroll system. (Not remove but change to inactive record).
• Necessary exit documentation issued to the employee.
• All company property retrieved from the employee before exit.
• All necessary information regarding the employee’s exit retrieved from the employee before exit.
• All affected departments notified for potential action required (system driven)

• The employee termination (termination of employment contract – Administrative process) process will be initiated when an employee’s contract of employment is terminated. Reasons for termination will be one of the following:

  • Business Closed / Insolvent
  • Deceased
  • Dismissed for misconduct
  • End of Fixed Term Contract
  • Medical Incapacity
  • Mutual Separation
  • Resigned
  • Retired – early
  • Retired – normal
  • Retrenched Involuntary
  • Retrenched Voluntary
  • Transferred in Group
  • Transferred payroll

The above Termination Reasons serve as a general guide and Divisions should always refer the HR Naming Conventions for all approved conventions to be used. Approved Naming Conventions will also always be aligned in the PSIber 2.0 System.

• The HR Department will compile a “Termination Pack” and proceed with the administrative side to terminate the employee on PSIber by updating the employee’s status to inactive with the termination date and reason for the termination, upload the required documentation onto PSIber) which will trigger an authorization request to the Payroll Department.
• The HR Department will then:

o Compare the applicable notice period to the terms and conditions as per the employee’s contract to ensure that it is valid taking the termination reason into account.
o Take note of any recoveries that needs to be made, indicate it on the Confirmation of Termination Form and notify the parties responsible.
o Follow up timeously to ensure that all recoveries are actioned before employee exits the company.
o Book an exit interview for the employee with an HR representative –Mandatory for all Junior Management Level and up. Optional for others
o Book/ ensure an Exit Medical is booked for the employee. Exit Medicals are mandatory for all employees who are employed in positions whereby the risk analysis done for the operation by the Health and Safety teams indicate the requirement for a medical examination – Analysis document to be available and HR aligned.

• Payroll is required to review the documentation for compliance and completeness in terms of the requirements of the Employee Exit Checklist:

o Standard Documents Required for all terminations:

 Confirmation of Termination Form
 Fund Withdrawal Forms
 Proof of Banking Details – not older than 3 months

o Resignation

 Resignation Letter

o Retirement

 Retirement Consultation Form

o Retrenchment

 Retrenchment Letter

o Mutual Agreement

 Settlement Agreement

o Transfer of Employment

o Death

 Death Certificate

o Dismissal – Misconduct and Incapacity

 Disciplinary Inquiry documentation

o Absconded

 Disciplinary Inquiry documentation

 

• The above documents require specific attention to:

o Termination Date
o Termination Reason
o Notice Period
o Signature of Employee

• Only if the above documentation is in order and fully compliant, can the process from a payroll perspective commence. If the documents are not in order, the authorization request to terminate will be rejected by Payroll, and a notification is to be sent to HR to review.
• In the event that a Severance Package is applicable, a Tax Directive application would need to be submitted to SARS.
• The payroll system would need to be updated with the following items as specified on the “Confirmation of Termination Form” received from HR

o Deductions in terms of:

 Unreturned or damaged items
 Loss/ damage as a result of negligence
 Pro-rata back payment in lieu of Bursary received
 Pro-rata back payment in lieu of Relocation Allowance received
 Loan Recoveries

o Final Payments in terms of allowances and/or overtime
o Annual Leave pay-out
o Annual Bonus pay-out
o Severance Package and Tax Directive Number.
o Reversal of bonus provisions
o pay-out of Savings

• If applicable, ensure pension and provident termination procedure is completed by the responsible Benefits Department.
• Specific attention should be given to the following within the company policy before processing a termination:

o Notice periods must be verified and adhered to.
o Maximum Leave Balances must be reviewed in terms of company policy before a Leave pay-out is processed.
o Bonus Policy must be reviewed before pay-out.

• Ensure all calculations are compliant in terms of the BCEA (Basic Conditions of Employment Act), other related Acts and company policy. Specific attention should be given to:

o Leave pay-out calculations

 According to section 21(1) of the BCEA: “An employer must pay an employee leave pay at least equivalent to the remuneration that the employee would have received for working for a period equal to the period of annual leave, calculated—
(a) at the employee’s rate of remuneration immediately before the beginning of the period of annual leave; and
(b) in accordance with section 35.”
 Section 35(4) specifies that employers should calculate leave, notice and severance pay as follows:
“If an employee’s remuneration or wage is calculated, either wholly or in part, on a basis other than time or if an employee’s remuneration or wage fluctuates significantly from period to period, any payment to that employee in terms of this Act must be calculated by reference to the employee’s remuneration or wage during—
(a) the preceding 13 weeks; or
(b) if the employee has been in employment for a shorter period, that period.”
 Thus, to calculate leave pay for an employee on termination:
(a) Although it seems like leave pay during employment (See Payroll Processing and Checking Blueprint) and leave pay on termination should work the same, it is important to note that for leave pay on termination (as well as severance or notice pay) the following amounts should also be taken into consideration as part of fluctuating income when calculating termination leave pay:

-For an employee who earns only fixed amounts such as a salary with no fluctuating income (such as overtime or bonuses), the employee would simply receive his usual daily remuneration when his leave days are paid out.

-If, however, the employee earned fluctuating income such as overtime, performance bonuses or commission in the past 13 weeks before his leave days is paid out, the fluctuating amounts will need to be averaged out over the past 13 weeks (it is common practice to use 3 months for monthly paid employees) to reflect the Average Fluctuating Income per Working Day and this amount should be added to the employees’ standard daily rate for leave pay.
-On termination, the following amounts will be included to calculate Average Fluctuating Income Per Day:

 Cash contributions made in lieu of employer contributions and benefits (Payments in kind) that the employee will no longer have during his/her notice period (See Severance Package Calculation below).
 Any non-discretionary bonuses that would have been received should the employee still have been in employment. This amount should be pro-rated before it is included in the Average Fluctuating Income Per Day calculation.

o Severance Package Calculations

 According to section 41(2) of the BCEA: “one week’s remuneration is due for each completed year of continuous service with that employer, calculated in terms of section 35 of the Act” (as discussed in the Leave Pay-out calculations) is due for Severance Pay.
 Should the employee not receive employer contributions or benefits that was part of remuneration during normal employment during his/her notice period, the equivalent value of that benefit should be paid out in cash as compensation as part of Severance Pay.

o Bonus pay-out Calculations

 Bonus pay-out calculations should be calculated as per the method/formula stipulated in the Payroll Policy.

o  PAYE, SDL and COIDA

• The Payroll Department must prepare the :

o UI19 form at the time of termination and upload on the employee’s electronic file. The HR Department will retrieve it from the system to distribute to the employee.
o Final Payslip
o The HR Department will prepare the Certificate of Service and distribute it and the UI-19 to the terminated employee within 2 weeks after termination. (Forwarding details is part of the exit process)