Notice pay is the amount paid to an employee for a notice period they are not required to work. When either party ends employment, the BCEA requires a notice period, and notice pay substitutes money for that time.
What it means
Rather than have an employee work out their notice, an employer may pay them for the notice period and end the employment immediately. The amount equals what the employee would have earned over the notice period. It is part of what is settled on termination, alongside any leave payout and severance.
Where it fits in
Notice pay is an earnings component in the final pay run. It is taxable remuneration; where it is bundled into a larger termination lump sum, the tax on the whole amount may be governed by a directive. It is distinct from severance pay, which compensates for the loss of the job itself.
Key rules
- Pay covering a notice period not worked.
- Equals the earnings the employee would have had over the notice period.
- Part of the termination settlement with leave payout and severance.
- Taxable, and may fall under a directive within a larger lump sum.
