Employers and Employees are required to give notice of termination as per the Basic Conditions of Employment. You can watch my video on Notice of Termination HERE. In that video I discuss what needs to happen if an Employer does not give sufficient notice of termination. In the latest video I answer the question “What happens if an Employee does not give sufficient notice”.
Employers deducting notice of termination from Employees who do not give sufficient notice is common practice and happens very often, however…
There will also often be a clause in the contract that says some version of “If an Employee does not give notice of termination as per the Basic Conditions of Employment / as per the contract of employment, the Employer has the right to deduct the amount of notice from the Employee’s final payment”. However…
Notice of termination is covered in Chapter 5 (Section 37 & 38) of the Basic Conditions of Employment Act. The content of those clauses are covered in the video on Notice of Termination and are not repeated in today’s blog / video. To answer today’s question, we turn to Chapter 4 Section 34 of the Basic Conditions of Employment – Deductions and other acts concerning remuneration.
If your preferred method of getting information is through watching and listening, you can watch the full video answering “Can Employers deduct notice of termination from Employees who do not give sufficient notice?” HERE.
Let’s unpack the requirements of Section 34 now, to answer the above question.
Section 34(1) An employer may not make any deductions from an employee’s remuneration unless –
(a) subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or
(b) the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.
We’ll unpack subsection 2 in a moment. But essentially what the above is saying is that a deduction can only be made if there is an agreement about the specific debt (subject to Subsection 2) or the deduction is required or allowed in terms of a law, collective agreement, court order or arbitration award. Examples of deductions that are allowed or required in terms of a law, collective agreement, court order or arbitration award include union subscriptions if it is required by a collective agreement, PAYE, UIF and a garnishee order (this is not an exhaustive list). Deductions of notice of termination do not fall under those and therefore to answer our question we look to the requirements of Section 34(1)(a) and subsection 2.
Section 34 (2) A deduction in terms of subsection (1) (a) may be made to reimburse an employer for loss or damage only if –
There are four “ifs”. Meaning a deduction is only allowed if it meets the four requirements detailed below in addition to the requirement of having a written agreement in place. Often the contract clause referred to above is stated as the written agreement. But then the important question is, does the deduction of notice of termination meet the following requirements:
34(2)(a) the loss or damage occurred in the course of the employment and was due to the fault of the employee;
(b) the employer has followed a fair procedure and has given the employee a reasonable opportunity to show why the deductions should not be made;
(c) the total amount of the debt does not exceed the actual amount of the loss or damage; and
(d) the total deductions from the employee’s remuneration in terms of this subsection do not exceed one-quarter of the employee’s remuneration in money.
Testing the deduction of notice against the four requirements above. I would say that it can meet the requirements of a & b, but I have my doubts about c & d. To prove that the deduction does not exceed the actual amount of loss or damage, the actual amount of loss and damage needs to be quantified and this is extremely difficult to do in most cases. The loss or damage is not purely the employee’s remuneration for the notice period. The loss or damage would be things like loss in sales, disruptions to operations, loss of client’s and other similar losses. As you can imagine these are difficult to quantify and pinpoint that it is as a result of the employee not working out their notice period. In my nearly 6 years of working in this field I have not had a situation where an Employer could accurately quantify the loss / damage. That doesn’t mean it isn’t possible, I just have not come across it. Furthermore, if it can be quantified, what is the likelihood that it will amount to the notice pay that is deducted?
The final requirement could possibly be met if the notice payment is under 25% of the total paid to the employee. But for a deduction to be fair, it needs to meet all four the requirements. In my opinion, deducting notice does not meet the requirements for a fair deduction and I therefore recommend that employers do not deduct the notice pay from employee’s final payment.
What then can an Employer do if an Employee does not work out their notice period?
An Employer can choose to take legal action. This, however, is a lengthy and costly procedure. But the possibility of it happening may be sufficient to deter employees from not giving sufficient notice. An Employer can also disclose that an Employee did not give sufficient notice, which may impact on an Employee’s employability.
I recognise that times Employees have requirements that make it difficult to work out their notice. In the video on Notice of Termination I discuss my recommendations for dealing with this.
This video discusses deducting notice pay, therefore just a reminder that notice does not need to be paid by the Employer if the Employee resigned and chose not to work out their notice. If it was the choice of the Employer, the Employer would need to pay out notice.
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Carmen Fourie, Employment Relations Director & Employment Relations Practitioner
