South Africa is retrenching at the moment and workers are facing retrenchments in just about every industry. In the past, it was a little bit easier because you could take a retrenchment package and if you have good experience, you would find a job with another company in a short while. It is not so any longer so you have to be extra careful about the decisions you make and ensure that you make the most of your retrenchment package as it might take a long time before you find another job, if you do find one, that is. We have thousands of unemployed graduates, even young medical doctors are struggling to find jobs yet we know that our hospitals and clinics have a shortage of medical doctors.
There are tough decisions to be made and it is important to get good advice because a poor decision could result in financial distress for yourself and your family for the foreseeable future. One of the most difficult decisions that most workers have to make is the following; Should I take a voluntary retrenchment package or should I not?
There are many factors that you have to consider before you make this decision e.g.
1.How much debt do you have? Would your retrenchment package be enough to settle your debts?Is it even a wise decision to use the package to settle your debts?
2.How many dependents do you have? Some people might not even have kids of their own but their parents and siblings might be dependent on them
3.If you have kids, would you be able to pay their school fees for at least the rest of 2019? What about 2020 school fees if you still don’t have a job at the end of the year?
4.Do you know how much tax you would pay if you take Voluntary retrenchment? If your retrenchment is a forced retrenchment, you getthe first R500 000 tax free, subject to certain conditions.
5.If you still have young children, you cannot afford to lapse especially your life cover policies. Do you have retrenchment waivers? Could you afford to pay for your life cover if you were out of a job for longer than 12 months?
6.Would youqualify for UIF?If so, how much do you qualify for?
7.How do youminimise your tax liabilityas you consider to take the package? You cannot afford to give a cent to SARS so it is important to keep your tax liability as small as possibility
8.How does yourpost retrenchment budgetlook like? What is your monthly expenditure? Where will the money come from?
9.What can you do tomake your retrenchment package last for as long as possible?
10.What is the impact of transferring your pension fund value to aretirement annuity vs a pension preservation fund?
The above are just some of the most important considerations but they are by no means exhaustive. Most importantly, you might decide NOT to take voluntary retrenchment and wait until you are forced to leave the company. Would that put you in a better or worse position?
For a Talk to your employees on retrenchments or Retrenchment advice, email email@example.com or firstname.lastname@example.org