When a contract of employment is terminated, there are various processes that the employer needs to implement. Aside from the internal processes such as removing the employee from the payroll system, disabling passwords and accounts and collecting company assets, there is the processing of documentation such as the certificate of service, the employee’s UI-19 and the required documents for the withdrawal of pension fund and possibly providing a reference for future employment.
An employer must process some of these documents as they are regulated by law; others, such as providing the exiting employee with a reference, are at the employer’s discretion.
Section 42 of the Basic Conditions of Employment Act (BCEA) stipulates that, on termination of employment, an employee is entitled to a certificate of service, which should contain the following:
- The employee’s full name,
- The name and address of the employer,
- A description of any council or sectoral employment standard by which the employer’s business is covered,
- The date of commencement and date of termination of employment,
- The title of the job or a brief description of the work that the employee was employed to do at the time of termination,
- The remuneration at the date of termination of employment, and
- If the employee requests, the reason for termination of the employment.
The employer is not obliged to provide any additional information other than what is required by the BCEA stated above. If they do wish to elaborate on the employee’s performance, they can decide to provide the employee with a reference letter.
Generally, employers have no legal obligation to provide an employee with a reference; an employer can, however, elect to provide a reference for future employment. Depending on how the employment relationship ended, it could assist in the employee leaving on good terms, where they felt appreciated and that their work was not unnoticed. It could further assist them with future employment.
As mentioned above, employers are not obligated to provide a positive or future reference, there is very limited authority, and the practice of employers providing employees with references for future employment is discretionary. Since it is unregulated, it is up to the employer what to say and how much information the reference will contain. Should an employer decide to provide a reference for the exiting employee, it should be reliable and honest. It should not be misleading or based on the employer’s subjective opinion of the employee. A reference should contain just the amount of information needed about an individual’s performance in their job to assure a prospective employer whether they are making the right decision and if the person would be a good fit to fill the vacancy.
It is an employer’s responsibility to register employees with the Unemployment Insurance Fund and pay contributions to the fund on behalf of the employee. Another document that must be completed by the employer when the employment relationship is terminated is a UI-19 form. This form contains details of both the employer and employee and includes the employee’s remuneration, the duration of employment, and the reason for the termination. The UI-19 document is an integral part of the exiting process as this will allow the employee to lodge a claim in terms of the Unemployment Insurance Fund (UIF).
If the employee was a member of a pension or provident fund to which the employer contributed on their behalf, on termination of the employment relationship, the employer must process a withdrawal form from the pension fund for the employee. This will allow the employee to gain access to their fund benefits.
Once the employer processes the withdrawal form, the employee will be entitled to withdraw the entire pension in a lump sum; alternatively, they can decide to leave their benefits in the pension fund or move it to another fund. This is different in the case of the employment relationship being terminated due to retirement, as the employee would only be able to withdraw one-third of their benefits as a lump sum. This ensures that the other two-thirds are reinvested to allow for monthly payments to the retiree.
The timeous completion of the required documents will make for a smoother exit process and save time in the future, ensuring that the employee will not need to return to the workplace and request that documents be processed.
Article By: Shannen Brown
Dispute Resolution Official – CEO Gqeberha