Precise MRC | A Business & Human Capital Consultancy Company

26 Oct

Everything you need to know - EMPLOYEE EXIT PACKAGES/BENEFITS

RETRENCHMENT, RETIREMENT, RESIGNATION, PENSION, SERVICE PAY

Governed by both the Labour Relations Act, as well as the Basic Conditions of Employment Act, permanent, fixed term, and part-time contracts of employment regulate the employment relationship (including rights, duties, and obligations) between the employer and the employee.

A permanent employment contract endures indefinitely or at least until the date of retirement, subject to being terminated by resignation, mutual agreement, or for reasons relating to misconduct, incapacity, or operational requirements of the employer.

A fixed-term contract of employment expires/terminates automatically on the arrival of a specific date, or the occurrence of a specific event agreed between the parties in the contract of employment. Accordingly, fixed-term contracts are generally utilised where the nature of the work is for a fixed duration only or linked to the conclusion of a specific project.

Contract transfer benefits or terminal benefits are the final entitlement of an employee upon transfer or termination of an employment contract. The employment contract can be terminated through:

1. End of fixed duration contract

2. Retrenchment

3. Mutual Consent

4. Retirement

5. Notice

6. Dismissal

7. Ill-health

8. Death

The nature of the contract transfer or termination will determine the kind of benefits that the employee will receive as detailed below:

5.1 Termination of employment through end of a fixed duration contract

A fixed duration contract may be for a specified period or may be determined by a specific event (i.e. the expiration of a set date). A fixed-term contract normally terminates automatically on the expiry of the period. Seasonal workers may be employed on a fixed-term contract for a season, which normally terminates at the end of the season. The table below shows the current practice prevailing in the market:

NB: Statutory benefits are granted according to the Labour Laws where best practice benefits can be negotiated. Where the contract is not renewed most organisations will treat the case as a retrenchment for purposes of TAX.

Practice	Applicable Benefits	Current Practice
Statutory Practice	Wages/Benefits	Available Options: Basic Salary or bonus arrears, if any, up to the last working day. Housing, education, transport, representation and any other allowances up to the last working day. Any other outstanding payments agreed upon between the employer and employee (i.e Overtime allowances, acting allowance, T&S etc) Paid an equivalent of 2 years’ salary for the position (basic plus housing)
	Bonus	Entitled to a 13^th cheque
	Company Vehicle	Discretionary depending on the length of the contract. Currently, at least 5 years of service. Disposed at a discounted value (using the market value of the value after evaluations)
	Gratuity	12% of annual salary for contracts of at least 5 years continuous service. 2 weeks of every year of service
	Leave	Cash in lieu of leave for the available days.
	Severance Packages	None
	Pension	Payment of pension fund will be in terms of the rules. If contract is not renewed at 55years and if you are say 36 years the employee is entitled to a pension (early retirement pension)
Best Practice	Cellphone/Laptop	Discretionary depending on the length of the contract. Currently, at least 5 years of continuous service
	Group Life Cover	Covered for a period of 12 months.
	Security allowance	For MD/CEO benefit is extended for three months
	Motor Vehicle	Discretionary depending on the length of the contract. Currently, at least 5 years of service. Option to purchase the car at book value (where applicable) usually 10% of book value
	Loans	Some organisations fast track loans and housing allowance Repayment period on personal loans, housing loans is extended to 48 months Loans will remain at staff rates if the organisation is in the financial services industry
	Bonus	Performance or pro-rated bonus is extended to the employee

5.2 Termination of employment through retrenchment

Retrenchment is a dismissal arising from the job that has fallen away due to the re-organisation of the business or the discontinuance or reduction of the business for economic, structural, technological or similar reasons. A dismissal in these circumstances is also referred to as redundancy. Unless more favourable conditions have been presented in the current retrenchment regulations the following terms shall apply:

Practice	Benefits	Comment
Statutory Practice	Wages/Benefits	Basic Salary or bonus arrears, if any, up to the last working day.
	Notice Pay	Housing, education, transport, representation and any other allowances up to the last working day. Medical Aid cover for immediate family for one years. Funeral cover for immediate family for one year. Any other outstanding payments agreed upon by the employer and employee (i.e Overtime allowance, acting allowance, T&S etc) 3 X Exit Salary* or 3 months basic salary
	Leave	Cash in lieu of leave for the available days
	Company Vehicle	Option to purchase vehicle at book value (where applicable)
	Staff Housing Loan	A minimum of 50% of the mortgage loan balance will be due and payable from the package upon exit. The remaining balance may be transferred to Mortgage Finance at the legislated minimum interest rate (currently 15%) plus 2%, within the remaining tenure, provided the staff member can demonstrate ability to meet the monthly repayments post separation
	Preservation Pay-out	As per the rules of the First Mutual Preservation Fund
	Pension	Payment of pension fund will be in terms of the rules. If the employee has not reached the stipulated retirement age, the employee will be entitled to an early retirement pension.
	Performance bonus	If the employee is retrenched after 5 years of contract, he/she is entitled to a performance bonus or a pro-rated bonus
Best Practice	Service Pay	Available options in the market: Exit salary* X number of years served 6 month’s basic salary for every year of completed service up to 15 years and thereafter 4 months’ basic salary for the remaining years of service. (Before 15 July 2015)
	Staff loans (Personal, car & Study)	Personal , car and study loans become due and payable
	Gratuity	Exit salary* X number of years served
	Fuel allowance	3 months during the notice period, in line with existing arrangements
	Telephone Allowance	Benefit extended for a period of three months
	Severance Packages	6 months’ basic salary. (Before July 2015)
	Cellphone/ Laptop	Sold to employee at nominal value (where applicable)
	Relocation Allowance	3 months’ basic salary
	Settlement Allowance	Exit salary*

NB: Statutory benefits are granted whereas benefits under best practice are negotiated.

In addition to the above, other organisations under the Parastatals Sector are offering the following:

v Medical Aid – Nine (9) months cover

v Staff Loans – Staff rates for six months

v Transactional Products – Staff benefits for six months

v Outplacement – A comprehensive program to empower the affected staff

5.3 Termination of employment through mutual consent/voluntary separation.

If the employer and the employee agree to terminate the contract, the contract terminates following the agreement. For example, a redundant employee may agree to voluntary retrenchment on an agreed package from a specified date. Below is the current practice in the market:

Practice	Applicable Benefits	Comment
Statutory Practice	Wages/Benefits	Basic Salary or bonus arrears, if any, up to the last working day Housing, education, transport, representation and any other allowances up to the last working day. Medical Aid cover for immediate family for 1 year. Funeral Cover for immediate family for one year. Any other outstanding payments agreed upon by the employer and employee. (i.e Overtime allowances, acting allowances, T&S etc.)
	Notice Pay	3 months’ basic salary Negative days will be written off
	Service Pay	Available options in the market: 2 weeks’ salary for every year served 6 weeks (1.5 months) per year served
	Severance Allowance	6 months’ basic salary
	Relocation Allowance	3 months’ basic salary
	Settlement Allowance	6 weeks (1.5 months) salary
	Leave days	Cash in lieu of leave for the available days will be paid
	Preservation Pay-out	As per the rules of the First Mutual Preservation Fund.
	Company Vehicle	Option to purchase vehicle at book value (where applicable)
Best Practice	Laptop/Cellphone	Sold to employee at nominal value (where applicable)
	Gratuity	3 months basic salary
	Medical Aid	6 months post separation (comprising 3 months per policy and an additional 3 months)
	Staff loans (personal, car & stud)	Personal, car and study loans will become due and payable

5.4 Termination of employment through resignation

If an employee has agreed to a fixed term contract, that employee may only resign if the employer materially breaches the contract. If there is no breach by the employer, the only way that the employee may terminate the contract lawfully is by getting the employer to agree to an early termination. A material breach means a serious breach that goes to the core of the contract. The refusal to pay wages, verbal or physical abuse, sexual harassment and discrimination are examples of conduct that amount to a material breach by the employer of the employment contract.

Upon resignation, an employee shall be entitled to the following benefits:

Applicable benefits	Current Practice
Wages/Benefits	Basic salary or bonus arrears, if any, up to the lasting working day Housing, education, transport, representation and any other allowances up to the last working day Medical aid and funeral benefit cover up to the last working day (month end usually because this is paid in advance) All outstanding payments agreed upon by the employer and employee (i.e. Overtime allowance, acting allowance etc.)
Leave	Cash in lieu of leave for the available days
Preservation Pay-out	As per the rules of the First Mutual Preservation Fund

In the event that there is no functional pension fund, an employee shall be entitled to the following as compensation:

v Pension Compensation - 1 months’ basic salary for every year of completed service.

v Deduction for anything being owed to the employer.

5.5 Termination of employment through retirement

Unless the contract of employment provides otherwise, a contract of employment normally terminates automatically when the employee reaches the agreed or normal age of retirement. In other words, it is an implied term of a contract that the contract terminates on retirement. If no retirement date is agreed upon, the normal retirement age will be implied from the employer’s practice in the past and the practice in the industry. In most industries, the normal retirement age is between 60 and 65 years of age. If the employee continues to work after reaching retirement age, the contract is extended and the normal rules of termination of employment apply unless the employee and the employer agree to something different.

Upon retirement an employee shall be entitled to the following benefits:

Practice	Applicable Benefits	Comment
Statutory Practice	Wages/Benefits	Basic salary or bonus arrears, if any, up to the last working day. Housing, education, transport, representation and any other allowances up to the last working day Medical Aid cover for immediate family for 1 year Funeral cover for immediate family up to policy maturity date (20 years from date of inception), or up to the death of the employee-whichever comes first All outstanding payments agreed upon by the employer and employee
	Leave	Cash in lieu of leave for the available days
	Preservation Pay-out	As per the First Mutual Fund
	Company Vehicle	Option to purchase vehicle at discounted book value (where applicable)
Best Practice	Gratuity	1 year basic salary
	Relocation allowance	3 months’ basic salary
	Cellphone/Laptop	To be given to the employee at no cost where the employee had use of such gadgets

In the event that there is no functional pension fund, an employee shall be entitled to the following to cushion them for retirement:

v Pension compensation - 3 months’ basic salary for every year of completed service.

v 1/3 of the amount shall be paid as a lump sum and the remaining 2/3 would be paid monthly over a period to be determined by the employer.

v In the event that the pension fund is revived, an employee shall be entitled to 1 months’ basic salary for every 1 year served without a pension fund.

5.6 Termination due to ill health

Incapacity on the grounds of ill health or injury. If an employee is temporarily unable to work in these circumstances, the employer should investigate the extent of the time that is unreasonably long in the circumstances, and the employer should investigate all possible alternatives short of dismissal. When alternatives are considered, relevant factors might include the nature of the job, the period of absence, the seriousness of the illness or injury and the possibility of securing a temporary replacement for the ill or injured employee. The following benefits shall be entitled to the employee:

Applicable benefits	Current Practice
Wages/Benefits	Basic salary in fully for the first 90 days Half pay for the next 90 days No pay for the next 15 days Housing, education, transport, representation ad any other allowance up to the last working day Any other outstanding payments agreed upon by the employer and employee i.e overtime allowance, acting allowance
Medical Aid	Extended for a period of 6 months.
Notice and Service Pay	None
Insurance (options available)	Given a lump sum plus 75% of your salary every month Lump sum then terminate contract
Leave	Cash in lieu of leave for the available days
Company vehicle	Option to purchase vehicle at book value (where applicable)
Preservation Pay-out	As per the rules of First Mutual Preservation Fund
Laptop/Cellphone	Sold to employee at nominal value (where applicable)

5.7 Termination of employment through death

A contract of employment normally terminates after the death or sequestration of the employer or upon the death of the employee. When an employee dies in service, his/her beneficiary (ies) shall be entitled to the following benefits:

Practice	Applicable benefits	Comment
Statutory	Wage/Benefits	Basic salary or bonus arrears, if any, up to the last working day Housing, education, transport, representation and any other allowances up to the last working day Medical Aid cover for immediate family for 1 year (Bonvie medical aid scheme covers the remaining family members for another 3 months). All outstanding payments contractually agreed upon by the employer and employee.
	Group Life Cover	Cover will be paid for three years to the family if the employee dies.
	Leave	Cash in lieu of leave for the available days
	Preservation Pay-out	As per the rules of the First Mutual Preservation Fund
Best Practice	Funeral Assistance Benefits	3 months basic salary For some Nyaradzo or Moon Light will continue to cover the remaining beneficiaries after the death of the principal member
Best Practice	Severance Package	2 years basic salary or as per Group Life Assurance policy with a package of 2 years basic salary if available.

Note: From the findings, we recommend that before contract transfer from permanent to fixed term or terminating the employee contracts, the employer must terminate the initial contract then renegotiate the fixed term contract with the employee. The employer should alert the worker union of the affected employee(s) and negotiate or agree on the terms and conditions of such termination or retrenchment of the affected employee(s).

For your Sector Salary and Benefits Survey Report Q4, 2022 kindly get in touch with us at Info@precisemrc.co.zw

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26 Oct

Everything you need to know - EMPLOYEE EXIT PACKAGES/BENEFITS