What are the retrenchment cover requirements?
Becoming retrenched is devastating. You were once so certain about your job but now you find yourself without work and having to figure out how you are going to pay your bills and get through the next few months. This can be a highly stressful time for both yourself and your family as you are no longer able to earn an income. This is why you should take out retrenchment insurance before you start your job, in order to remain protected from such issues.
Now, you might be wondering what the requirements of retrenchment cover are in order to apply for it. After all, you need to meet them in order to apply for this vital income protector. Retrenchment cover in South Africa does require you to be working a full-time job and you need to have been in your current position for at least one year. If you want to apply for retrenchment insurance in South Africa, read on below for the general requirements.
The duration of your employment
Many retrenchment insurance providers require you to have been in your current position for one full year and to have been employed without a break of longer than two weeks for 24 months. This is to show them that you are not simply job-hopping and looking for a way to sustain your income while unemployed.
In order to prove that you have been employed for a full year, you can take your contract in when applying for retrenchment insurance or you could show them a print-out of your bank statements showing that your salary has been entering your account for a full year. It is important to have this proof upfront, as it will save time for both yourself and your insurance provider.
The type of employment
In order to qualify for retrenchment cover when you lose your job, you have to be a full-time employee in your current company. The general requirements are that you are a salaried, full-time employee and are not working as a freelancer, on a contract basis or as a part-time employee earning a temporary income.
Your employment must be permanent and this must be stated in a legal contract, in order for your retrenchment cover provider to accept your application. This does make it difficult for those who are in the “probation” period of their first job, as this is not considered to be permanent or long-term employment. You will need to send in a signed proof of contract once you are made permanent staff in order to meet the requirements of your insurance provider.
The economic sector you fall under
Economic sectors can have an impact on whether or not you can receive retrenchment insurance. For example, some insurers will not cover those in the mining sector, as there are frequent retrenchments in this sector and too many claims are being made on a regular basis.
Some insurers will simply offer you a much higher premium depending on your economic sector. However, it is still important to find out if you can apply for retrenchment insurance in order to protect your income in case the worst happens. Ask for clear terms and conditions from your insurer so that you know which economic sector they consider you to fall under before you send in an application.
How long has cover been in place?
You are only able to make a claim from your retrenchment insurance if it has been in place for six months before you become retrenched. This is because you will have been able to build up a significant amount for the lump sum payment which can help during your time of unemployment.
This period of six months also shows that you were unaware of your imminent retrenchment. Once you are completely sure that you have been made a permanent employee of your company, you can apply for retrenchment insurance. The premiums are based on your income and will be calculated on your income after tax.
Claiming when retrenched
If you are involuntarily retrenched, the claims process is easy and you will receive your payout within three months. However, if you have decided to take a voluntary retrenchment package or have been asked to leave due to misconduct you will not be covered.
If you have declined an offer for a different or better role from your employer who is retrenching you from your position or from another company, you will also not be covered. If you claim from UIF (Unemployment Insurance Fund), your retrenchment insurance package will not be affected.
This also applies if your company offers you a severance package. Speak to your insurer about their stipulations, as each one is different. Be sure to keep these exclusions in mind when signing up for any retrenchment insurance, as they could affect your financial well-being in the future.