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It’s now final: no severance pay on retirement in Swaziland – September 2014

It’s now final: no severance pay on retirement in Swaziland – September 2014

We have previously written about the Industrial Court judgement on the subject of payment of severance allowance when an employee has reached the age which, in that particular industry, is considered to be the normal age of retirement. This was the judgment in the matter between Thring vs. Dunns Swaziland, Case No. 32/2013 (Industrial Court). The Industrial Court judgment issued in this case was to the effect that severance pay is not payable to an employee whose services are being terminated on the basis that he/she has reached the normal retirement age.

This judgement was received with grudges by many who had always believed that severance allowance was due and payable to retiring employees as a “thank you” token by employers for the employee’s long and faithful service. I must say that subsequent to that Article, CMAC was flooded by an influx of calls and personal visits from stakeholders and interested parties who wanted to find out where we got this ‘new law’ that severance allowance was not payable on retirement. The reason for the dissatisfaction about this judgement is well understood; it is premised on the concern that a majority of employers do not have pension funds or schemes except for the Civil Service and the compulsory Swaziland National Provident Fund (SNPF) which is also not a pension fund but a provident fund. Hooray for the concerted efforts that are currently being made by the Swaziland National Provident Fund to have it converted into a Pension Fund. Now, for those employers who do not operate a pension fund, the question is what will happen to those employees who work up to a point of reaching the retirement age in that company? In the absence of both pension and severance pay, this would mean those retiring employees would go home empty handed as even additional notice is not payable to a retiring employee. For the non-payment of additional notice on retirement, see the decided case of Philemon Kunene vs. Swazi Oxygen (Pty) Ltd, Case No. 335/2000 (Industrial Court).

In consequence to the common and yet mistake belief that severance allowance is payable on retirement, the employee who was the Applicant in the Thring vs. Dunns case appealed the Industrial Court judgement to the Industrial Court of Appeal, arguing that the Industrial Court judgement was erroneous or bad in law. Amongst other factors, it was argued on behalf of the employee that “it would be unfair for the Court to conclude that an employee who has worked for one employer for 26 years would not be paid a severance allowance which is allegedly an allowance to compensate an employee or to recognise an employee for his long and faithful service to the employer”. This argument was premised on the school of thought which considers that the purpose of severance allowance is to award the employee for good, long and faithful service to an employer.

Unfortunately for employees, the Industrial Court of Appeal, agreeing with the lower court, has dismissed the proposition that the purpose of severance allowance is to compensate an employee for his/her long and faithful service. The Court said there was no supporting authority for this proposition. In conclusion, the Appeal Court confirmed that the proper position of the law is that severance allowance is not payable to retiring employees. The Court reasoned that this termination of employment is not at the instance of the employer but rather the automatic termination of the employment contract due to effluxion (or maturity) of time and therefore is not attributable to the employer.

It can only be the subject for another day as to who fixes the retirement age: is it the employee or the employer? If it is the employer, is the termination then not at the instance of employer?

Written by Mthunzi Shabangu, of LEX Africa member Cloete Henwood Associated in Swaziland.

Published 3 September 2014

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