In accordance with local labour laws, employees are entitled to receive an ‘end of service’ payment upon resignation or termination from their employer. The level of payment due is calculated based on the duration of service and final pay, which makes the employer’s ending liability uncertain.
However, without the legal obligation to physically fund this liability, many companies in the region retain a growing exposure on the balance sheet, with the hope and presumption that these funds will always be readily available with general cash flow. Concerns around this approach include:
• Accumulation of liabilities
• No exclusion of assets
• Employee insecurity
• Exposure of employee funds risk as working capital
• Forthcoming company valuations / Initial Public Offering (IPO)
• Undetermined cash flow
We provide strategic solutions to ‘end of service’ liabilities and assistance to creating an asset for your organisation.