If I resign, what benefits am I entitled to in South Africa?

If I resign, what benefits am I entitled to in South Africa?

In South Africa, if you decide to resign from your job, you may be entitled to certain benefits, depending on your employment contract and the company’s policies. Here are the main benefits you might expect:

Payment of Accrued Leave:

If you have unused annual leave at the time of your resignation, your employer is legally required to pay you for this. For example, if you have 10 days of unused leave, you should be paid the equivalent of 10 days of work.

Notice Pay:

Depending on your employment contract, you may be required to work a notice period or, if agreed upon, receive payment in lieu of notice. This means if your notice period is one month and you do not work during this period, you should still be paid for the month.

Pro-rata Bonus or 13th Cheque:

If your company typically pays an annual bonus and you resign partway through the year, you may be entitled to a pro-rata portion of this bonus. For instance, if bonuses are paid in December and you resign in June, you might receive half of the usual bonus amount, depending on company policy.

Pension Fund or Provident Fund:

Upon resignation, you can choose to withdraw your contributions from the company’s pension or provident fund. However, it’s important to note that early withdrawal could have tax implications, and it might be more beneficial to transfer these funds to a preservation fund or a retirement annuity.

UIF Benefits:

While typically associated with unemployment due to job loss not by one’s own choice, you might be eligible for Unemployment Insurance Fund (UIF) benefits if you can prove that you resigned due to constructive dismissal (resigning due to untenable work conditions created by the employer).

When considering resignation, it’s essential to review your employment contract and discuss these matters with your HR department to understand exactly what you’re entitled to and any conditions that may apply.

FAQs

If I Resign, Do I Get My Full Provident Fund?

Yes, if you resign, you are generally entitled to your full provident fund in South Africa. This includes both your contributions and the vested portion of your employer’s contributions.

When you resign, you have several options regarding your provident fund:

1. Withdrawal: You can withdraw the full amount of your provident fund, which will include your contributions and the vested portion of your employer’s contributions. Be aware that withdrawals may be subject to taxation.
2. Transfer: You can transfer the funds to another retirement savings vehicle, such as a preservation fund or the provident fund of your new employer. Transfers to these vehicles are usually tax-free.
3. Leave in Fund: You can leave your provident fund in the current fund, although this might not always be an option depending on the rules of the specific fund.

Do I Get Company Contribution if I Resign in South Africa?

Yes, you generally receive the employer’s contributions to your provident fund when you resign, subject to the rules of the specific provident fund.

Upon resignation, the vested portion of the employer’s contributions is included in your total provident fund benefits. The vesting rules determine how much of the employer’s contributions you are entitled to, which can depend on factors like the length of your service.

• Vesting Rules: These vary by fund but typically, the longer you have been with the company, the larger the portion of the employer’s contributions you are entitled to.

New Law on Provident Fund in South Africa

The new law on provident funds in South Africa, which came into effect on 1 March 2021, aligns the treatment of provident funds with that of pension funds. The key changes include:

1. Annuitization: Provident fund members are now required to annuitize two-thirds of their retirement savings, meaning they must use this portion to purchase a retirement annuity that provides a monthly pension. The remaining one-third can be taken as a lump sum.
2. Grandfathering Provisions: Savings accumulated in provident funds before 1 March 2021 are not subject to the new annuitization rules. This means that only contributions and growth from 1 March 2021 onwards are affected by the new law.
3. Exceptions: Members who are 55 years or older as of 1 March 2021 are not required to annuitize their provident fund savings, provided they remain in the same fund.

• Annuitization Requirement: Two-thirds must be used to purchase an annuity.
• Grandfathering Provisions: Existing savings before the law change are not affected.
• Age Exceptions: Members 55 and older as of 1 March 2021 are exempt from annuitization if they stay in the same fund.

These changes aim to ensure that retirees have a steady income throughout their retirement, reducing the risk of outliving their savings.