What to do should you be retrenched?

Retrenchment is a form of dismissal due to no fault of the employee. It may form part of a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to reducing its employees. There is nothing in the Disaster Management Act which prevents an employer from engaging in a retrenchment process during the lockdown.  A recent report released by Stats SA found that one in three South African businesses are laying off staff to cope with the pandemic and lockdown.


It is natural to feel anxious about losing your income, but remember there are various forms of remuneration options to access before rushing to withdraw your retirement fund.

  • Severance pay should be at least one week’s remuneration per completed year of service. This is taxed according to the income tax act and treated as a lump sum paid at retirement.
  • Your leave days due should be paid in full.
  • You need to sign up with the unemployment insurance fund to start claiming UIF.
  • Contact your credit providers to possibly make arrangements or claim from your credit life insurance.
  • Draw up a new budget.
  • You can temporarily decrease or stop your debit orders towards savings. You can continue these as soon as you are able to.


Withdrawing from your pension/provident fund should be your last resort.  Early access to these savings will negatively affect your retirement planning. Remember that your retirement fund is still a long-term investment although you might be going through a short-term change.  Do not let your current situation impact your long-term planning. It is possible to preserve your retirement savings or leave it invested in your employer fund should the fund rules allow.  There are no tax implications on transferring to a preservation fund.


Make sure that you find the solution most suitable to your individual situation.  Look at various fee structures, performance figures and value added services from service providers.


If you have any questions or need assistance you may contact the 27four client services team.