The retrenchment process in South Africa is governed by Sections 189 and 189A of the Labour Relations Act 66 of 1995 (The LRA) of South Africa.
Section 189A deals with large scale retrenchments while Section 189 deals with small scale retrenchments – which are far more common. This guide deals only with small scale retrenchments in South Africa. however if you are not certain whether you are dealing with a large or small scale retrenchment you should seek advice before beginning the retrenchment process as the two are vastly different. Large scale (189A) retrenchments apply to employers with more than fifty employees when more than a certain number of employees are retrenched within a twelve month period.
Retrenchment, or to give it its correct term, dismissal for operational requirements is defined as a dismissal related to the employers economic, technological, structural or similar requirements.
This is a “no fault” dismissal and is distinct from dismissals relating to the employee’s conduct or capacity.
Retrenchment becomes a possibility in circumstances where the employer can no longer afford its existing staff complement, wishes to restructure, introduce technology or such similar situations.
As there is no element of fault on the part of the employee the law requires the employer to do everything reasonably possible to avoid or minimise dismissals. That being said however the employer does have a right to make commercial decisions which are in its best interest and are based on sound legal advice.
The LRA requires that the employer initiate a consultation process as soon as retrenchments are contemplated. The first step is to issue a notice in terms of Section 189(3) which must disclose all relevant information so as to allow the employees to meaningfully consult with the employer and ensure a fair retrenchment process.
The information which must be disclosed includes (at a minimum):
Download a template here
The next step in the process is to identify the other consulting party and commence with the consultation process. If there is a collective agreement then this may contain a requirement as to consultation (e.g. with a majority trade union). If a workplace forum exists then this should be consulted as well as any registered trade unions with members who may be affected. If there is no such party then the employees must be consulted either individually or through their chosen representatives.
In terms of the LRA, the parties must consult on:
The first consultation meeting should be scheduled as soon as reasonably possible after the Section 189(3) notice has been issued – while still permitting the employees sufficient time to properly prepare.
The first consultation meeting should be scheduled as soon as reasonably possible after the Section 189(3) notice has been issued – while still permitting the employees sufficient time to properly prepare.
The parties now enter the consultation process.
How long this will take and how many meetings will be necessary will depend entirely on the parties and the specific situation. It may well be that employees accept the inevitability of their retrenchment and wish to consult only on the severance to be paid – or indeed the employees may challenge each and every aspect of the proposed retrenchments.
What is important is that the employer MUST consult meaningfully on the issues identified above. The process must be genuine and the employees must be afforded a full opportunity to influence the outcome of the process.
Selection criteria must be either agreed to or must be fair and objective. LIFO (last in, first out) is generally accepted as a fair criterion however the employer is also entitled to retain key skills. Performance and conduct should NOT be used as selection criteria.
Severance pay must also be negotiated – however the minimum in this regard is one week per completed year.
Each and every suggestion or proposal made by the employee parties must be fully considered and responded to in writing. If rejected, a proper reason for rejecting the proposal must be given in writing.
Minutes of all meetings must be kept.
You may also wish to appoint a neutral party to either facilitate this process or to conduct a mediation – however this is not a legal requirement and the process may validly be conducted “in house”.
The outcome of the consultation process will be one of two possibilities – either consensus will have been reached or it will not.
If the parties have reached consensus then an agreement should be drawn up and signed by all parties. This should record that consensus has been reached and the full terms of the agreement between the parties. It should record that it is a full and final settlement of all disputes.
Download a template here.
If however agreement is not reached (bearing in mind that the employer is not obliged to reach consensus but only to ATTEMPT to reach consensus) then the employer may implement the retrenchments.
It is only at this stage (ie once the consultation process has been exhausted) that notice of retrenchment may be given.
The affected employees must now be given written notice of the termination of their employment due to the employer’s operational requirements. The employees must be given a period of notice – this may either be found in their employment contract or will be in terms of the Basic Conditions of Employment Act which provides as follows:
Employees may be required to work their notice period or it may be waived by the employer – in which case the employees must be paid in lieu of such notice period.
Upon termination employees must be provided with a certificate of service.
Upon termination employees must be provided with a certificate of service.
In the event that employees wish to challenge the fairness of their retrenchment a dispute must be referred to the CCMA or relevant bargaining council within thirty days of dismissal.
The dispute will then be conciliated and if it remains unresolved a certificate to this effect will be issued. The dispute must be referred to either arbitration if a single employee is involved or to the Labour Court if more than one employee is involved. This referral must take place within ninety days of the certificate of non-resolution being issued.
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