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Namibia: Are employees always entitled to severance pay upon resignation?

30 September 2022
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Overview

  • Severance payment to employees is regulated under Section 35 (1) of the Labour Act, 11 of 2007 (Act).
  • The Act sets out three specific instances when an employer must pay severance pay to an employee.
  • Under section 35 (1)(c) an employee is entitled to severance pay if at the age of 65 they resign or retire.
  • Certain interpretations given to section 35(1)(c) of the Act view the inclusion of the word ‘or’ undersection 35(1)(c) to indicate that an employee is entitled to severance pay if the employee resigns, regardless of age.
  • We are of the considered view that an employee is not entitled to severance pay if the resignation or retirement takes place before the age of 65.

Severance payment to employees is regulated under Section 35 (1) of the Labour Act, 11 of 2007 (Act).

The Act sets out three specific instances when an employer must pay severance pay to an employee, namely:

  • where the employee is dismissed, unless the dismissal was on grounds of misconduct, poor work performance or if the employee unreasonably refuses to be reinstated;
  • where the employee dies while employed; or
  • where the employee resigns or retires on reaching the age of 65 years.

As a condition precedent to receiving severance pay, the Act prescribes that an employee is only entitled to severance pay where they have completed 12 months of continuous employment with the employer.

Severance pay to an employee, as a statutory minimum, comprises an amount equal to one week’s remuneration for every 12 months of continuous employment with the same employer. Where an employee is lawfully dismissed for a valid and fair reason and in terms of a valid and fair procedure a dismissed employee is not entitled to severance pay. However, where the employee is dismissed on a non-fault basis, such as when they are retrenched or dismissed for incapacity due to ill health, an employer must pay severance.

In the case of a death of an employee, their family is entitled to receive severance pay from the employer. In the absence of a will, the employer must pay the severance to the employee’s surviving spouse; or to the employee’s children if there is no spouse; and lastly to the employee’s estate, as outlined in section 35 (6) of the Act.

Under section 35 (1)(c) an employee is entitled to severance pay if at the age of 65 they resign or retire.

The Gibeon matter and severance pay upon resignation

Certain interpretations given to section 35(1)(c) of the Act view the inclusion of the word ‘or’ undersection 35(1)(c) to indicate that an employee is entitled to severance pay if the employee resigns, regardless of age.

This interpretation may derive from a reading of the Namibian Labour Court case of Gibeon Village Council vs Uaaka as authority to support the view that any employee is entitled to severance pay upon resignation, regardless of age.

Upon a proper consideration of the appeal record, the papers filed in the matter as well as the judgment, it is seen that the employee filed a dispute against her erstwhile employer for unfair labour practices and severance pay.

Upon further consideration it is noted that the ‘severance’ that the employee claimed was for the payment of ‘leave gratuity’ that she believed she was entitled to upon her resignation. The employee in this instance was not 65 years of age. The Labour Court ordered that the employee was to be paid ‘severance pay that is due to her in terms of section 35 of the Labour Act 11 of 2007’.

We are of the considered view that the substance of the Gibeon matter did not concern the payment of severance pay as contemplated under section 35 of the Act, and that the payment which the employee sought was for her ‘leave gratuity’ as provided for under section 37 of the Act. Respectfully so, we do not believe that the Gibeon matter is authority for the position that all employees are entitled to severance pay upon resignation from employment.

Applying the canons of statutory interpretation, ‘the cardinal rule of construction is that words of a statute must be given their ordinary, literal or grammatical meaning if the words are clear and unambiguous, unless it is apparent that such literal construction would lead to manifest absurdity, inconsistency, injustice or would be contrary to the intention of the legislature’.

In our view an ordinary, literal and grammatical reading of section 35(1)(c) of the Act does not result in an absurdity, inconsistency or injustice. The sub-section must be read as a whole, and the word ‘resignation’ must be read as linking to the condition that the employee must be 65 years of age. We are of the considered view that an employee is not entitled to severance pay if the resignation or retirement takes place before the age of 65.