Many businesses offer retirement benefits for their workers. By offering voluntary retirement, a certain segment of their workforce chooses to retire before the standard time, usually when the person reaches his or her 50s or early 60s. With voluntary retirement, most firms provide a package which is less substantial than if the employee were to wait for the full retirement age. This is beneficial to the business by keeping the rotation of workers moving as well as implementing savings by ultimately paying out less money to its former employees.
In certain countries, voluntary retirement is referred to as a “golden handshake.” This comes in the form of a clause in the employee’s contract that mandates certain payments in the form of a severance package when the person chooses early retirement.
In Kenya for an employer to carry out Voluntary Early Retirement under section 35 (c) of the Employment Act of 2007 a notice of intent to terminate employment must be done in writing to the employee.
An employee whose contract of service has been terminated under subsection shall be entitled to service pay for every year worked, the terms of which shall be fixed. However, the same shall not apply if an employee is a member of:
- A registered pension or provident fund scheme under the Retirement Benefits Act;
- A gratuity or service pay scheme established under a collective agreement;
- Any other scheme established and operated by an employer whose terms are more favourable than those of the service pay scheme established under this section;
- The National Social Security Fund.