Severance pay is a critical component of employment in Botswana, ensuring that employees receive fair compensation after years of service. However, many employers and employees are unclear about how severance pay works, leading to disputes and legal complications. This guide breaks down everything you need to know about severance pay in Botswana, including eligibility, calculations, and employer obligations, based on the latest Employment Act amendments.

1. What is Severance Pay?

Severance pay is a statutory benefit that an employer must provide to employees. It serves as financial security when an employee leaves an organization after long-term service.

2. Who is Eligible for Severance Pay?

Under the Botswana Employment Act, employees qualify for severance pay:

• When have completed at least 60 months (5 years) of continuous service with the same employer.
• If are not covered under a gratuity or pension scheme that replaces severance pay.
• If employment contract is terminated (except for gross misconduct) or they resign voluntarily after the qualifying period.
• Iff an employee has not completed 60 months of continuous service, they are still entitled to severance pay if their contract is terminated. The amount of severance pay will be calculated proportionally to their length of service.

3. How is Severance Pay Calculated?

Severance pay in Botswana is calculated as follows:

• For the first 5 years of service: One day’s basic wage for each month worked.
• For every additional year beyond 5 years: Two days’ basic wage for each month worked.

Example Calculation

If an employee earns P5,000 basic wage per month and has worked for 8 years:

• First 5 years: (1 day per month) x (12 months x 5 years) = 60 days’ wages
• Additional 3 years: (2 days per month) x (12 months x 3 years) = 72 days’ wages
• Total severance pay = 60 + 72 = 132 days’ wages
• To calculate the daily wage, we divide the monthly wage by 30 days. P5000/30 days = P166.67 per day.
• Therefore the final amount due is 132 days * P166.67 = P22,000.00.

4. When Must Employers Pay Severance?

Employers are legally required to pay severance:

• At the end of every 60-month period, unless an alternative agreement exists.
• Upon termination of employment for eligible employees, regardless of whether they have completed 60 months of continuous service.
• Within a reasonable period after termination to avoid legal action.

5. Common Issues & Disputes

a) Employers Avoiding Payment

Some employers terminate employees just before the 5-year mark to avoid severance obligations. However, this practice is illegal under Botswana’s Employment Act, and affected employees can seek legal recourse.

b) Delayed Payments

Employers sometimes delay severance payments due to financial constraints. Employees should be aware that severance pay is a legal right, and they can escalate disputes to the Labour Department.

c) Fixed-Term Contracts & Severance Pay

Employees on fixed-term contracts are entitled to severance pay unless their contracts explicitly provide a gratuity or pension benefit.

6. What Employees Can Do if Severance Pay is Denied

• Talk to HR or Management: Discuss the issue with the employer first.
• Consult the Labour Department: File a complaint with the Ministry of Employment, Labour Productivity, and Skills Development.
• Take Legal Action: If necessary, escalate the matter to the Industrial Court.

7. Best Practices for Employers

• Plan Ahead: Set aside funds for severance obligations to avoid financial strain.
• Be Transparent: Clearly outline severance terms in employment contracts.
• Ensure Compliance: Keep up with Botswana’s labor laws to avoid legal disputes.
• Keep Accurate Records: Maintain accurate records of employee service to ensure proper severance calculations.
• Employment Act: Provide your employees with the latest version of the employment act.

Final Thoughts

While we strive to provide accurate and useful information, severance pay laws may be subject to amendments. For the most up-to-date legislation, always refer to the Botswana Government Gazette or consult the Ministry of Employment, Labour Productivity, and Skills Development.

Final Thoughts

Severance pay is a fundamental employee right in Botswana. Employers must fulfill their obligations, and employees should be aware of their rights. Understanding severance pay ensures a fair and compliant workplace for all.

For comprehensive HR support and legal guidance regarding Botswana employment law, contact Do Business today, and we will connect you with a reputable HR Practitioner or Legal Professional. Email info@dobusiness.co.bw for support.

Download a free copy of the Botswana Employment Act here.