Severance Agreement Template for South Africa

A Severance Agreement is a legal contract between an employer and departing employee that sets out the final terms of their employment separation. In South Africa, these agreements typically outline the payment package, benefits continuation, and any special conditions like non-compete clauses or confidentiality requirements.

Under South African labour law, particularly the Basic Conditions of Employment Act, severance agreements help protect both parties during retrenchments or voluntary exits. The agreement usually includes a settlement amount (often one week's pay per year worked), details about medical aid continuation, pension benefits, and often contains provisions preventing the employee from taking legal action against the company.

Use a Severance Agreement when ending an employment relationship needs clear documentation and protected outcomes for both parties. This is especially important during retrenchments, voluntary separation programs, or executive departures in South Africa. The agreement becomes essential when dealing with sensitive exits, handling confidential information, or managing potential legal disputes.

The timing matters most during restructuring, mergers, or when offering early retirement packages under South African labour law. Companies often implement these agreements during major organizational changes to ensure smooth transitions, protect trade secrets, and provide clear financial terms that comply with the Basic Conditions of Employment Act and Labour Relations Act.

• Severance Pay Agreement: Standard template focusing on financial terms and basic separation conditions
• Voluntary Redundancy Settlement Agreement: Used when employees voluntarily accept redundancy packages
• Layoff Agreement: Specifically designed for retrenchments and mass workforce reductions
• Non Compete Severance Agreement: Includes restrictions on future employment with competitors
• Non Disparage Agreement: Focuses on maintaining company reputation through mutual non-disparagement terms

• Employers/Companies: Initiate and draft Severance Agreements, typically through HR departments or legal teams, ensuring compliance with South African labour laws
• Departing Employees: Review, negotiate, and sign the agreement, often receiving financial benefits and continued healthcare coverage
• Labour Lawyers: Review terms, advise both parties on rights, and ensure compliance with the Basic Conditions of Employment Act
• HR Directors: Manage the process, coordinate with legal teams, and ensure fair implementation
• Union Representatives: Negotiate terms on behalf of union members during large-scale retrenchments or restructuring

• Employee Details: Gather full employment history, current salary, benefits, and position details
• Payment Terms: Calculate severance pay according to South African labour law (minimum one week per year served)
• Notice Periods: Review employment contract and statutory notice requirements
• Outstanding Benefits: List all applicable leave pay, bonuses, and pension contributions
• Special Conditions: Define any non-compete, confidentiality, or non-disparagement terms
• Legal Compliance: Use our platform to generate a compliant agreement that meets Basic Conditions of Employment Act requirements
• Internal Review: Have HR and finance teams verify all calculations and terms

• Party Details: Full legal names, company registration details, and employee information
• Severance Package: Clear breakdown of financial compensation, timing of payments, and tax implications
• Benefits Continuation: Specific terms for medical aid, pension, and other benefit extensions
• Release Clause: Mutual release of claims under South African labour law
• Confidentiality Terms: Protection of trade secrets and business information
• Non-Disparagement: Mutual agreement to maintain professional conduct and reputation
• Return of Property: Timeline and process for returning company assets
• Governing Law: Explicit reference to South African labour legislation and jurisdiction

A Severance Agreement differs significantly from a Business Acquisition Agreement in both purpose and scope, though they're sometimes confused during company restructuring. While both deal with significant business changes, their core functions are distinct.

• Primary Purpose: Severance Agreements handle employee departures and benefits, while Business Acquisition Agreements govern the sale or purchase of entire businesses
• Parties Involved: Severance Agreements are between employer and employee; Business Acquisition Agreements involve business owners, buyers, and shareholders
• Legal Framework: Severance Agreements fall under South African labour law and the Basic Conditions of Employment Act; Business Acquisition Agreements are governed by corporate and commercial law
• Duration and Scope: Severance Agreements typically handle immediate termination terms; Business Acquisition Agreements often include ongoing obligations and transitional arrangements
• Financial Terms: Severance focuses on employee compensation and benefits; Business Acquisition deals with business valuation, assets, and purchase terms