The economy is toast.
Many companies must cut costs, resulting in retrenchments.
The Employment Act compels companies to pay employees it retrenches a severance package of at least a week’s remuneration per completed year of service.
Companies must pay outstanding leave in full.
Sars will tax all severance benefits according to the retirement tax tables.
Leave pay, bonuses and the final salary do not form part of the package and are taxed according to the normal income tax tables.
Ingram discussed a number of steps you can take to soften the retrenchment blow:
Try and have a clear game plan for these kinds of events before the time so that you can make the best decisions, if this happens to you.
Have an emergency fund of at least three months’ expenses. If there is talk in your workplace of retrenchments; try to increase this to six months. It will help not to go into debt straight away; all this does is worsen your problem.
Try to reduce - or eliminate - all your short term debts like credit cards, personal loans, overdrafts, etc.
Analyse your monthly expenditure and cut costs where possible (things such as eating out, entertainment, etc.). Talk to your family so that they know what’s going on and the implications thereof.
- If need be; take out money from your access bond rather than your credit card.
What not to do:
Avoid dipping into retirement savings. If you have a company provident fund; you might be tempted to take the cash. Doing so will just set you back for retirement.
- Spend your severance package on a holiday or a new car.
For more detail; listen to the interview in the audio below.
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