CodeKitHubWhat Is This Tool?
A retrenchment package in South Africa is what an employer owes an employee whose job is terminated due to operational requirements (redundancy). It typically has three components: statutory severance pay, notice pay (if notice isn't worked out), and payout of unused annual leave — this calculator covers the statutory severance portion only.
The formula is weekly remuneration × completed years of service, where weekly remuneration is calculated as monthly salary × 12 ÷ 52. This is the statutory minimum under Section 41 of the BCEA — your employment contract or a collective agreement may provide for a more generous severance amount.
Only completed years of service count toward the statutory minimum. If you've worked 7 years and 11 months, the statutory calculation uses 7 years — partial years aren't prorated (though, again, your employer may choose to be more generous).
For the 2026/27 tax year, the first R550,000 of a severance lump sum is completely tax-free. Any amount above that threshold is taxed according to SARS's retirement lump-sum tax tables, which use a tiered rate structure rather than a single flat rate — this calculator flags whether you're within the tax-free threshold but doesn't compute tax on any excess.
Source: Basic Conditions of Employment Act, Section 41, South African Revenue Service (SARS) severance lump-sum tax-free threshold for 2026/27.
Why Use It?
- Applies the exact statutory formula (weekly remuneration × completed years) automatically.
- Flags whether your severance falls within the R550,000 tax-free threshold.
- Works for any salary and years-of-service combination.
- Free and instant — no signup, the calculation runs entirely in your browser.
How to Use
- Enter your monthly salary in Rand.
- Enter your completed years of continuous service (whole years only).
- Read your estimated statutory severance pay and weekly remuneration.
Example
Input
Monthly salary R25,000, 6 completed years of serviceOutput
Estimated severance pay: R34,615.38Weekly remuneration = (25,000 × 12) ÷ 52 = R5,769.23. Severance = 5,769.23 × 6 = R34,615.38 — well within the R550,000 tax-free threshold.
Retrenchment severance formula at a glance
| Component | Value |
|---|---|
| Formula | Weekly remuneration × completed years of service |
| Weekly remuneration | Monthly salary × 12 ÷ 52 |
| Years counted | Completed years only, not prorated |
| Tax-free threshold (2026/27) | R550,000 |
| Legal basis | Section 41, Basic Conditions of Employment Act |
Related tools
These calculators cover similar end-of-employment benefits in other countries.
→ Redundancy Calculator (Ireland) · Gratuity Calculator (India)
Frequently Asked Questions
Why does my severance only count completed years?
The BCEA's statutory minimum is based on completed years of continuous service — a partial year (e.g. 11 months into your 7th year) isn't prorated under the statutory formula. Your employer's own policy or a collective bargaining agreement might be more generous and include partial years, but the legal minimum doesn't require it.
What's included in a full retrenchment package besides severance pay?
A full package typically also includes notice pay (if your employer doesn't have you work out your notice period) and payout of any unused annual leave. This calculator estimates the statutory severance component only.
Is retrenchment severance pay taxed?
The first R550,000 of a severance lump sum is tax-free for the 2026/27 tax year. Any amount above that is taxed according to SARS's retirement lump-sum tax tables, which apply tiered rates rather than a single flat percentage — this calculator flags whether you're within the tax-free threshold but doesn't compute tax on any excess. Consult a tax practitioner or SARS for an exact figure if you're above the threshold.
Can my employer pay less than the statutory minimum?
No — 1 week's remuneration per completed year of service is the legal minimum under Section 41 of the BCEA. An employer can pay more (through contract or collective agreement) but not less, except in narrow circumstances such as where the employer successfully applies to the CCMA or Labour Court for an exemption.
Is my data stored anywhere?
No. The calculation runs with JavaScript directly in your browser; your salary is never sent to a server or stored anywhere.