Retrenchment in South Africa - The Dictates of our Labour Laws | Legal Articles


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Retrenchment in South Africa - The Dictates of our Labour Laws

Losing employment is one of the most devastating experiences any person could ever go through in life, more so if the person is the main or the only breadwinner in the household. It can be presumed that an employee who voluntarily resigns from their job would have put in place contingency measures to survive until they secure other employment, what of an employee who is summarily dismissed or retrenched? A lot of challenges are encountered in such a scenario. South African labour laws are some of the most stringent when it comes to employee rights. In this article we shall look at a general overview of the requirements for a fair retrenchment process.

what is the labour law procedure for retrenchment

What Does it Mean to be Retrenched?

For the benefit of those who might not be familiar with what retrenchment is, we will define it first. Retrenchment is a form of dismissal whereby employees are dismissed owing to no fault on their part. A retrenchment, so to speak, is a dismissal based on the operational requirements of the employer which can be;

  1. Economic – the business is not making enough profit to break even against the expenses required to run it;
  2. Structural - the business restructures to improve operations, such that other positions become redundant; or
  3. Technological - the business acquires new machinery resulting in some positions of other employees becoming unnecessary or redundant.

Owing to the reasons above, it may then become necessary for the business to retrench some employees. However, the labour laws in South Africa place an obligation on employers to approach retrenchment processes with caution and to consider it only as a last resort. Section 189 of the Labour Relations Act 66 of 1995 (LRA) sets out a guideline of the retrenchment process which can be summarised as the following:

What is the Labour Law Procedure for Retrenchment in South Africa?


The first stage is whereby the employer conducts a consultation process with the employees who are likely to be affected by the retrenchment. Employee representatives (if any) should also be invited to this consultation process. The aim of this process is to seek consensus between the employer and the employees, so that if possible a retrenchment can be avoided. The employer will give reasons why it is contemplating on effecting retrenchments, and explain if other alternatives have been considered. The class of employees that will likely be affected will be disclosed and the criteria of how these employees will be selected. This criteria must be fair, objective and justifiable. A time frame as to when the retrenchments may likely be effected may also be disclosed. In turn, the employees must also be given an opportunity to air their views, ideas and suggestions, which the employer may accept, respond to or consider at a later stage. As alluded to above this is a consensus seeking process which must be approached in good faith in order to seek ways that will have the least negative impact on both sides e.g reducing the number of affected employees if retrenchment cannot be avoided, as well as the timing of the dismissals. The issue of severance pay will also be discussed during this consultation process. In the event that it is found that retrenchment is unavoidable, the next stage is the selection stage.

Selection stage

After the consultation process is complete and it is decided that retrenchment is unavoidable, then the employer will conduct the selection process using the criteria that was disclosed during the consultation process. Selection criterion differ depending on the reasons why the retrenchment is being effected, sometimes the criteria will be based on qualifications, experience, skills, or maybe a certain department has been affected by the introduction of new technology. The most common criteria used is the “last in first out” criteria, which seeks to reward loyalty and protect the interests of long serving employees.

Notice of termination

This will be the last stage whereby the selected employees will be served with termination letters and their severance pay will be processed according to the Basic Conditions of Employment Act 75 of 1997.

Van Deventer & Van Deventer Incorporated  - Labour Law Attorneys South Africa

In the event that the employer employs more than 50 employees, a slightly different procedure is provided for in section 189A of the LRA which we will touch on in another article in future. At Van Deventer and Van Deventer Incorporated we understand that losing employment is very daunting and employee rights must be protected at all cost. This is why our Labour Law litigation department stands ready to shield you from unfair dismissals and retrenchments. We assist both employers and employees through retrenchment processes amongst a wide array of other labour law litigation services. Contact us for further assistance.



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