Budget 2025: Government allocates R11bn for early retirement of 30,000 public employees

THE National Treasury has set aside R11 billion to pay for early retirement of at least 30,000 government employees over the next two fiscal years in a bid to manage the public sector wage bill.

The early retirement incentive was first announced in the 2024 Medium-Term Budget Policy Statement (MTBPS) as a measure to reduce compensation costs while rejuvenating the public service.

Finance Minister Enoch Godongwana told Parliament on Wednesday that the government was reactivating early retirement of public sector employees without penalties to help manage wage costs.

Godongwana said the plan was to manage headcounts by incentivising employees over 55 years-old to retire and moderate compensation spending as new recruits join the public service at entry-level salary grades.

He said the early retirement initiative was thus allocated R4.4bn in 2025/26 and R6.6bn in 2026/27, with preliminary savings retained by departments expected to average R7.1bn per year over the medium- to long-term.

"An amount of R11bn is provisionally allocated over the next two fiscal years for the early retirement initiative, whose intention is to attract younger employees into the public service," Godongwana said.

"The interventions on the wage bill are aimed at ensuring that when key frontline staff are lost through natural attrition and retirement, sectors are able to fill vacant posts to keep services running effectively."

In the Budget documents, the National Treasury stated that the government remained committed to improving performance and efficiency in the public service, however, access to funding to address compensation shortfalls will be linked to participation in the early retirement initiative.

"These amounts are set aside for departments to access during each financial year if they meet the relevant requirements, when they demonstrate readiness or meet specific conditions such as the minimum age of each applicant and confirmation that each application has been approved by the relevant executive authority," it said.

"For example, provisional allocations to address compensation shortfalls in the departments of Defence and Correctional Services will be appropriated to these departments once the extent of their participation in the early retirement programme is clarified.

Departments will be allowed to retain their savings from this initiative, and may use them to address existing compensation pressures and support capacity building.

"Treasury said the government was aiming to improve the capability of the State with measures to strengthen education, health and defence; continue rebuilding the South African Revenue Service; and incentivise early retirement to revitalise the public service.

It said the 2025 Budget also confirmed the government’s commitment to macroeconomic stability – which lays the foundation for sustainable growth – by restoring the health of the public finances.

BUSINESS REPORT