It is not uncommon for employer and employee to “agree” on the reason for termination. This may occur prior to termination, where the parties discuss what will be recorded as the reason for termination. It may also occur at CCMA proceedings where often the company offers a sweetener of changing the dismissal to mutual termination.
It is probably fair to say that the ultimate benefit is that the employee has a “clean” record and need not show dismissal as the cause of departure. The employer, in turn, has a bargaining chip that could encourage reaching agreement.
Often the reason is further influenced by a desire to have the reason for termination to fall within a scope that will allow the employee to claim benefits from the Unemployment insurance Fund (UIF).
Common practice it may be, but is it allowed?
In Swanepoel v KPMG, Swanepoel (the applicant) the parties had agreed to a mutual termination. Swanepoel however, wanted his UIF form to reflect retrenchment or constructive dismissal as the reason. KPMG refused, given that was not what had been agreed, causing Swanepoel to approach the court for an order to compel.
The court found that the documents were a correct reflection of what had been agreed. It then turned its attention to the law regarding UIF. It found that it would be dishonest of KPMG to record a reason different to the true reason, being a parting of ways mutually. KPMG would be making a false entry and liable for a criminal prosecution.