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Thread: PAYE and UIF for a retrenched or boarded employee

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    PAYE and UIF for a retrenched or boarded employee

    We have an employee who has to be retrenched / medically boarded. They are over 65. Part of the negotiated package deal is most likely that we continue to pay their medical aid, rather than a lump sum payment which we can't really afford. Will this future monthly payment still be considered as a salary and subject to UIF and PAYE, even though the employee will no longer be working for us?

    The employee should be entitled to UIF benefits, but if we continue having to submit the monthly return because of their medical aid expense, then that's going to complicate the claim. Suggestions on the proper way to deal with this?

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    HI there,
    I'm no expert, but I would suggest you see a labour lawyer and draw up a contract w.r.t the medical aid you are going to continue to pay for a period. I would suggest the "lump sum" / severance be dealt with as if it was being paid to the employee on retrenchment. I.e. you would obtain a tax directive for the amount. And then the medical aid that you would continue to pay would not have any uif nor paye on it as it is not a salary.
    always fear when Christel is near....

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    Thanks Christel. Its the last bit of your answer that I am hoping for some clarification on. Is it above board to pay someone a monthly amount, be it a pension or as part of a retrenchment deal and not classify it as a salary, with all the complications that go along with that?

    The tax directive is not really possible I don't think, because they will want to know the amount of the payout. This we don't know as we will be paying her each month for the rest of her life. It could be one month or 20 years, so the value is unknown.

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