Frequently Asked Questions

Retrenchment is when your employer terminates your employment because of their operational requirements — not because of anything you did wrong. It's governed by Section 189 of the Labour Relations Act and requires a formal consultation process.

Involuntary retrenchment is when your employer initiates the process. A Voluntary Severance Package (VSP) is when your employer offers staff the option to leave with a package, usually before involuntary retrenchments begin. Both qualify for severance pay treatment under SARS, but the U-19 termination code differs — Code 11 for retrenched, Code 16 for VSP. Use the wrong code and your UIF claim can be delayed.

The UI-19 is the form your employer completes to declare your employment has ended. It's required for your UIF claim. The termination code tells the UIF why you left:

• Code 11: Retrenched / Staff Reduction
• Code 16: Voluntary Severance Package
• Code 17: Reduced Work Time
• Code 6: Resigned — if your employer accidentally puts this, your retrenchment UIF claim falls away

Check the code before you leave the office. Insist it's correct.

Example U-19 form with the termination code section highlighted — make sure code 11 or 16 is used for retrenchment.

Register at your nearest Labour Centre with your ID, your UI-19, your final payslip, and a bank statement. You can claim up to 12 months of benefits depending on how long you've contributed. Apply within 6 months of your last day.

Severance pay is taxed using the Retirement Lump Sum Tax Table — the favourable one. The first R550,000 is tax-free, but it's a lifetime allowance shared across all severance benefits and retirement fund lump sums you've ever received. Previous withdrawals reduce your remaining tax-free pool.

Before your employer or fund can pay you any lump sum, they must apply to SARS for a Tax Directive using the IRP3(a) form. SARS calculates the exact tax to deduct, and only then can payment be made. You cannot submit this form yourself.

The "Reason" code your HR selects determines which tax table applies:

• "Severance benefit – Involuntary retrenchment" uses the favourable retirement lump sum tax table with the R550k tax-free portion
• If the wrong source code goes onto your IRP5 (e.g. 3907 instead of 3901), SARS will treat your severance as normal income and you lose the R550,000 benefit entirely

Check your IRP5 carefully when it arrives. The severance amount should be under code 3901, and the tax withheld under code 4115. If something looks wrong, raise it immediately — over-tax is slow to recover.

From 1 September 2024, your retirement fund is split into three components, and at retrenchment each one is treated differently:

• Vested Component (everything you saved before 1 Sept 2024) — can be cashed out using the favourable retirement lump sum tax table, OR preserved tax-free.
• Savings Component (1/3 of new contributions) — can be withdrawn, but taxed at your marginal income tax rate (could push you into a higher bracket). Minimum withdrawal R2,000, no maximum, limited to once per tax year, admin fee applies.
• Retirement Component (2/3 of new contributions) — cannot be withdrawn at retrenchment. Must be preserved tax-free and stays locked until retirement.

Decisions here are no longer simple — what worked before September 2024 may not be the right choice today.

Often yes, through conversion to individual membership — but only if you act within the conversion window (usually 30 days). After that, you'll face waiting periods and possible late-joiner penalties. Whatever you do, don't cancel your cover while you figure things out — once you're off, getting back on costs more.

It ends when your employment ends. Most schemes offer a continuation/conversion option — convert to individual cover within typically 60 days without medical underwriting. This is critically important if your health isn't optimal. Once the window closes, new cover requires full underwriting.

Yes — most credit agreements include credit insurance that covers retrenchment. Contact each lender (your home loan provider, vehicle finance, credit card issuer) and ask for the retrenchment claim process. People forget about these and lose months of cover.

Different deadlines apply:

• Pension fund choice: Usually 60 days before defaults kick in
• Medical aid conversion: Usually 30 days
• Group life continuation: Usually 60 days (31 in some Alexander Forbes schemes)
• UIF claim: 6 months
• Credit insurance claim: Usually 60–90 days from retrenchment

Get advice early — the most expensive mistakes come from missing deadlines.

Yes — and it's free. The Sanlam withdrawal form (for example) is 10 pages long and asks you to choose between cash and preservation for three different pots, then select up to four investment portfolios from a list of 24. Allan Gray, Liberty, and Old Mutual have similar forms. I sit with you online or by phone and we work through it together. No charge. If you'd like me to become your formal financial adviser on the resulting policy, that's a separate conversation — but the paperwork help itself comes with no strings attached.

Yes. WhatsApp or email me everything you've received and I'll triage it — which forms are urgent, which can wait, what each one is asking for, and what I think you should do. That's the fastest way to feel less overwhelmed.

The initial conversation is free. The Tax & Portfolio Snapshot is free. If we decide to work together on your retirement, investment, or insurance products, I'm remunerated through the providers in line with FAIS regulations — fully disclosed before you sign anything. No hidden fees, no obligation to proceed.