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Briefing to the Portfolio Committee on Defence on the Mobility/Exit Mechanism for Members of the SA National Defence Force and the Employee Initiated Severance Package for Public Service Act Personnel

Prepared by the Chief of Human Resources, DOD11 Jun 07

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Aim

To brief the Portfolio Committee on Defence on the implementation of the Mobility/Exit Mechanism (MEM) for members of the SA National Defence Force and the Employee Initiated Severance Package (EISP) for Public Service Act Personnel (PSAP)

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Scope

Exit Mechanisms Implementation of the MEM for SANDF

members and EISP for PSAP Analysis of the Impact of Implementation of

the MEM and EISP Conclusion

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Exit Mechanisms: MEM

Legal basis GEPF Rule 14.8 and 20 amended Approved by National Treasury Minister of Defence approved 5 Jul 05 (ito Section 55 of

Defence Act [42 of 2002]) Intent of MEM

Should lead to a tangible rightsizing progress Execute through realistic succession planning Guard against the exodus of expertise/scarce skills Advise members iro career progress as informed by the

Transformation and Restructuring imperatives Choice to accept/reject offer – MEM is voluntary

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Exit Mechanisms: MEM (cont)

Guidelines for Succession Planning iro MEM Are functional groups/musterings constrained by

critical shortages Status of ETD and learner throughput Maintenance of expertise Contribution to rightsizing (MTEF & longer) Contribution to race-rank distribution correction “Old” Service System contract expiries and

renewal justified Succession planning:

•Role of Services and Divisions

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Exit Mechanisms: EISP

Minister of PSA determination introduced the EISP wef 1 Jan 06 Ito Section 3(3)(c), Public Service Act, 1994

DOD introduced the EISP wef 31 May 06 EISP Benefits Structure

Pension beenfits ito the Gov Employees Pension Law, 1996

Departmental benefits ito the Implementation Measures EISP Application

Employees initiate their separation via the EISP EISP Status

DOD expects possible 200 applications for the total MTEF period

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MEM FOR SANDF MEMBERS: BENEFIT STRUCTURE

Less than 10 years service and/or younger than 55 years of age

Less than 10 years service and/or younger than 55 years of age

10 years pensionable service and 55 years or older

10 years pensionable service and 55 years or older

GRATUITY & ANNUITY

- NO SCALING DOWN OF PENSION BENEFIT RULE 14.3.3(b)

- WITHOUT AN ADDITION OF PENSIONABLE SERVICE RULE 14.2.4(b)

GRATUITY & ANNUITY

- NO SCALING DOWN OF PENSION BENEFIT RULE 14.3.3(b)

- WITHOUT AN ADDITION OF PENSIONABLE SERVICE RULE 14.2.4(b)

ACTUARIAL INTEREST RULE

14.4.2

ACTUARIAL INTEREST RULE

14.4.2

STATE GUARANTEE: Third party debts recovered from exit pay

CONTRACTUAL OBLIGATIONS: Released

PRO-RATA SERVICE BONUS

LEAVE: Payment of leave credit

RESETTLEMENT: Actual expenses

MEDICAL PROVISION: Plus 10 years service, option to buy into RFMCF up to age 60, and eligible for medical service according to SAHMS provisions

EXIT PAY: 2 weeks for every full year service, but a minimum of R 15 000.00 payable

OFFICIAL HOUSING: One month’s notice

SUBSIDISED MOTOR VEHICLE SCHEMES

RESKILLING: Maximum of R13 000.00 for reskilling, training for employment opportunities, and entrepreneurial skills

MEMMEM

Pension Benefits ito GEPFPension Benefits ito GEPF

Departmental BenefitsDepartmental Benefits

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EISP FOR PSAP EMPLOYEES: BENEFIT STRUCTURE

Less than 10 years service and/or younger than 55 years of age

Less than 10 years service and/or younger than 55 years of age

10 years pensionable service and 55 years or older

10 years pensionable service and 55 years or older

GRATUITY & ANNUITY

- NO SCALING DOWN OF PENSION BENEFIT RULE 14.3.3(b)

- WITHOUT AN ADDITION OF PENSIONABLE SERVICE RULE 14.2.4(b)

GRATUITY & ANNUITY

- NO SCALING DOWN OF PENSION BENEFIT RULE 14.3.3(b)

- WITHOUT AN ADDITION OF PENSIONABLE SERVICE RULE 14.2.4(b)

ACTUARIAL INTEREST RULE

14.4.2

EISPEISP

Pension Benefits ito GEPFPension Benefits ito GEPF

Departmental BenefitsDepartmental Benefits

MEDICAL: 55 yrs & older qualify for post-retirement medical assistance:

Less 10 yrs equal 12 times employer contribution

10 to 15 yrs equal to 36 times employer contribution

15 yrs plus 2/3rd employer contribution per month

STATE GUARANTEE: Third party debts recovered from exit pay

CONTRACTUAL OBLIGATIONS: Released

LEAVE: Payment of leave creditRESETTLEMENT: Actual expenses, 55 yrs & older compensated according to PSCBC Resolution 3 of 99 & Departmental Policies

EXIT PAY: 2 weeks for every full year service, but a minimum of R 15 000.00 payable

OFFICIAL HOUSING: One month notice

SUBSIDISED MOTOR VEHICLE SCHEMES

RESKILLING: Maximum of R13 000.00 for reskilling, training for employment opportunities, and entrepreneurial skills

PRO-RATA SERVICE BONUS

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MEM AND EISP as at 31 May 2007: Approved by Minister of Defence

Race and Gender

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EISP as at 31 May 2007: Approved by Minister of Defence

Race and Gender

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MEM AND EISP as at 31 May 2007: Approved by Minister of Defence (cont)

Age Group

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MEM AND EISP as at 31 May 2007: Approved by Minister of Defence (cont)

Age Group

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MEM AND EISP as at 31 May 2007: Approved by Minister of Defence (cont)

Fin year and Budget Holder

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Termination Type 2005/06FY 2006/07FY

Contract Expired 500 1 023

Deceased 864 780

Departmental Transfer 281 830

Discharged 319 194

Medical Discharged 104 142

Resigned 1 319 1 104

Retired 350 312

Total 3 737 4 385

EXIT PER REASON OTHER THAN EXIT MECHANISM

Note: FY 2005/06: MEM/EISP = 12,8% of total exits FY 2006/07: MEM/EISP = 18,7% of total exits

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Conclusion Steady results are being achieved on stated

objectives eg representivity and age profiles with the implementation of the MEM 42% of all exits are middle-management (Col, Lt Col,

WO1, WO2) 30,2% of all exits are White middle-management

males 85,7% of all exits are White

Difficult to forecast the exact rightsizing results as MEM/EISP are voluntary

The tempo of implementation for both the MEM and EISP determines their success in the DOD

Continuous (monthly) monitoring of progress Continued emphasis on succession planning

efforts ito the MEM application

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DISCUSSION/QUESTIONS

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Exit Mechanisms: MEM

Overview 1994 to 2005 Downsizing/rightsizing origins

• Interim Constitution (Act 200 of 1993) Section 236(c) • Constitution (Act 108 of 1996) Section 24(1) of Schedule 6

and Provisions of the Interim Constitution continues in force, Sections 236(1),(2),(3),(6) & (7)(b) & (8), 237(1) and 2(a)

Above provisions were aimed at the size and affordability of the DOD and informed the Defence Review of 1998

• Envisaged compulsory employer-initiated retrenchment • Overtaken by the availability of the Voluntary Severance

Package (VSP) (July 1996) and the Employer Initiated Package (EIP)

• The DOD steadily downsized towards 68 253 Regulars (excluding 8 617 MSDS), mainly via natural attrition

• 67 167 personnel exited from 1 Jan 96 – 31 May 07 (20 902 via the VSP/EIP)

• Rightsizing = E3 and R3 (PFMA requirement iro resource management)