Retrenchment Information

We have been receiving a lot of queries regarding retrenchments. Based on these queries we decided to provide a basic guide to retrenchment in order to assist Employers in following the correct procedures and Employees in knowing their rights regarding retrenchment.

Retrenchments are known as no-fault dismissals because the employment relationship is terminated as a result of the employer’s operational requirements and not due to any fault on the part of the employee. Operational requirements include the economic, technological and structural needs of the employer which may necessitate the retrenchment of employees. In addition to the existence of operational requirements, the employer can only lawfully embark on retrenchment schemes if the retrenchment is a measure of a last resort. The employer must be able to show that there were no reasonable alternatives available to it, but retrenchment.

Be aware that this is only a basic guide and that every case of retrenchment is unique and may require professional legal assistance, should you require any assistance kindly contact us.

When an Employer is anticipating retrenchment they must firstly consider alternatives to retrenchment. Alternatives to retrenchment may include but is not limited to, transfers to other positions and/or branches, implementing short-time or implementing lay-offs. 

The Employer must formally consult all relevant parties when considering retrenchment. This includes people mentioned in the collective agreement; the workplace forum; the registered trade union of affected workers or if there is no trade union, the workers or their representatives.

Employers must give the consulting party written notice of anticipating retrenchment which must contain the following information:

o the alternatives considered by the employer and the reasons for rejecting those alternatives;

o the number of employees likely to be affected by the proposed retrenchments;

o the selection method of employees;

o the time when the retrenchments are likely to be effected;

o the severance pay proposed;

o any assistance that the employer offers the employees facing retrenchment;

o the possibility of future employment;

o the number of employees that the employer has retrenched in the preceding 12 months; and

o the date, time and place when consultations will take place.

Prior to the consultation process the employee should be afforded a reasonable time within which to consider the retrenchment notice and formulate representations and proposals. The employer must afford the employee ample opportunity during the consultation process to make representations and put forward proposals about the proposed retrenchments. The parties should investigate all possible ways of avoiding or limiting the number of retrenchments. The employer must consider and respond to the representations made by its employees and if the employer does not agree with the representations put forward, then the employer must state the reasons for disagreeing. It is highly advisable that the notice contains a scheduled date and time for consultation.

Consultation Procedure:

After the retrenchment notice is sent out the employer is obliged to consult with the affected employees or their trade union representatives. It is important that although the employer foresees the need to retrench, the employer should not prematurely make the decision to retrench a specific employee or group of employees until the consultation process is completed and the employee has been given an opportunity to be heard and make representations. This is due to the fact that the employee may put forward proposals or alternatives to retrenchment which were not considered by the employer and which may result in the retrenchment process being restructured or even cancelled, partly or entirely. The failure by employers to engage in consultations with its employees as contemplated by the Act, will undoubtedly result in the retrenchment being procedurally unfair.

The employer and the consulting parties must agree on the following:

Ways of -

1.         avoiding or minimising retrenchments; -

Employees facing retrenchment should also be cautioned that if they are offered reasonable alternative employment and they refuse such alternative employment, then the employee will forfeit their right to severance pay.

2.         changing the timing of retrenchments;

3.         reducing the effects of retrenchment;

4.         choosing which workers to retrench; and on

5.         severance pay –

Employees are entitled to (1) one week’s remuneration for each and every completed year of continuous service. Nothing prevents an employer from paying severance packages to its employees which are more favourable than the statutory prescribed minimum.

Urgently note that retrenchment in an organisation with more than 50 employees may qualify as a large scale retrenchment and the Act prescribes additional requirements in this regard. It is advised that these retrenchments are done with legal assistance.

Employees who are treated contrary to the ACT, should consult attorneys immediately as disputes over retrenchments need to be referred to the Commission for Conciliation Mediation and Arbitration (“CCMA”) within 30 days from the date of that retrenchment. In the same regard it is also imperative for employers to consult attorneys before embarking on the retrenchment process to ensure that they comply with our employment laws from the commencement and throughout the process.

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