When Do You Have to Retire from Employment?

You may find it interesting to know that there is no legislated retirement age in South Africa, which means that retirement age is set by the employer. However, this does not give companies unlimited discretion and their retirement age should be set in the employment contract that each employee signs, prior to actually starting employment.

Due to the proliferation of “Labour Consultancies”, which are very often staffed by “Consultants” who are not legally qualified, many companies who rely on these “Labour Consultants” find themselves in a difficult position when they have an employee who is approaching a reasonable retirement age, without there being any clarity in this regard.

While this is less than ideal, it is not unsolvable and what the employer is then required to do, is to introduce a Retirement Policy which is applicable uniformly, across the entire Company. Once this policy has been introduced, retiring at the specified retirement age is not optional, although continued employment may be, should the appropriate contractual arrangement be put in place.

Should you have staff who are then over the specified retirement age, it is best to engage with them and agree on either a notice period or the conclusion of a new fixed term contract. Regulating employment after retirement age can be a complex matter and should this not be managed correctly; you may find your business facing a Labour Court suit and not just an informal CCMA process.

Companies that have been subject to acquisitions often find themselves in tough situations where the new holding company has a retirement age which was lower than that at the company which was acquired. While the new retirement age will become applicable to the staff of the old business, the application of this policy needs to be made clear to all affected staff members. Suitable discussions must also be had with the affected staff members as to the longevity of their employment under the new employer.

When employers set their retirement age, they must be mindful of the fact that they may have pension or provident fund policies that set a certain retirement age. Having a policy that sets an employee’s retirement age at a date after their retirement at the Company, is inherently problematic and the reverse can also be true.

Employers who choose not to enforce a retirement policy in certain cases but enforce it in others are setting themselves up for very expensive dismissal disputes. The same is true for parastatals and SOE’s who often keep employees on for many years after they have reached retirement age, renewing their contracts every 3 (three) or 6 (six) months, seemingly oblivious to the fact that they are creating a reasonable expectation of continued employment.

Managing a retirement incorrectly could cost your business up to 24 (twenty-four) months’ salary of the senior staff member that you have tried unsuccessfully to retire.

Labour Law is not something that is always straightforward or easy to understand and using someone to assist you who mostly chairs disciplinary inquires for a living, could cost you a great deal more than what you save on their hourly rate.

Employers may find the Employment Incentive Tax Act difficult to implement and administer correctly. Should you be in doubt, rather give us a call. Trust the experts, use The Labour Counsel.

The Labour Counsel offers a wide range of services, including the issuing of proper employment handbooks and conducting fair disciplinary hearings. By ensuring that you have the correct offer of employment and Disciplinary Code, we are able to eliminate the stresses that result from hiring the wrong candidate!

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