Company downsizing

Posted in Communication   |   March 17th, 2020

Company downsizing is an unfortunate event that can happen at any age.

The following basic rules will help you with your decisions on how to manage your immediate future.

What can you expect to receive?

The money due to you when you are retrenched can be divided into two very distinct categories:

Money paid by the Company:

Soon after your final day of employment, you should receive the money paid by the company, minus a certain amount of tax. These funds are made up of your Retrenchment Package, Deferred Compensation payments, outstanding leave pay, bonuses and ex gratia payments.

Retirement Funds – Personal Funds:

You have two choices for the benefit, which has accrued to you in your PensionFund

1. paymentt in cash of the balance in the Fund due to you, on which you will pay tax.
2. transfer your Pension Fund balance due to you to a Preservation Fund or a Retirement Annuity. No tax is payable on transferred funds.
3. Currently Provident Fund balances due can be paid out tax free

Investment Strategy

What should I do with the proceed of the package?

• Pay off as much of your short-term debt as possible.
  • Transfer your Retirement Funds to a Preservation Fund or Retirement Annuity. This will save unnecessary taxation and preserve your retirement planning.
  • Invest the Retrenchment Package Cash in an accessible portfolio until new employment is found. Any remaining funds can then be invested in a more permanent portfolio
  • Establish life cover needs for your spouse and dependent children.Especially to replace any Company benefits
  • Apply for some form of Medical Aid. It is easier to immediately join a new Scheme utilising your current track record than delaying the decision and incur potential late joiner penalties
  • Acceptable medical care is becoming increasingly more expensive and could destroy an already strained budget. Continue with the company medical aid if possible, or apply for a Medical Care plan with a reputable company. Combinations of medical insurance and medical schemes can be considered.

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