Basic guidelines for retrenchment based on the operational requirements of employers with less than 50 employees
Retrenchment takes place when an employer has to retrench some employees during restructuring or due to another operational requirement, such as the reduction of the employer’s salary cost. An employer may do so under section 189 of the Labour Relations Act (No. 66 of 1995).
As is the case with any other grounds for dismissal, retrenchment due to operational requirements must be procedurally and substantially fair. Section 189 requires all consulting parties to try to reach consensus on several specific aspects as detailed below:
Consultation must commence when the employer is considering retrenchment.
Section 189(1) provides that, before retrenching, employers must consult any person whom the employer is required to consult with in terms of any collective agreement that may be in place. If there is no collective agreement, the intended retrenchment must be individually discussed with each individual employee who could be affected by the retrenchment. If the employee is a member of a trade union such trade union must also be included in the process.
Section 189(2) requires that the consulting parties must consider the following aspects with a view to reaching consensus:
Alternatives to avoid retrenchments;
Appropriate measures to retrench as few employees as possible;
Measures to possibly postpone retrenchment;
Appropriate measures to mitigate the adverse effects of the retrenchment;
Method(s) by which the employees who are to be dismissed are selected (selection); and
Section 189(3) stipulates that the employer must notify all employees directly in writing or via their trade unions of the intended retrenchment. Such a notice must include the following information at least:
The reasons for the retrenchment;
Alternatives to dismissal that were considered, and the reasons why they could not be implemented;
The number of employees likely to be affected;
The proposed method of selection;
Any assistance to be offered to the affected employees; and
The possibility of future re-employment.
The employer must give the affected employees the opportunity to make representations in this regard.
Section 189(7) stipulates that the decision on which employees are to be retrenched must be fair and objective regardless of whether or not pre-agreed selection criteria are in place between the parties.
After the consultation process has been completed all employees who have been selected for retrenchment must receive a written notice of termination of service.
Employees are entitled to receive severance pay but only if they are retrenched for operational requirements. Section 41 of the Basic Conditions of Employment Act (No. 75 of 1997), provides that an employee who is dismissed for operational requirements is entitled to severance pay equal to at least one week’s remuneration for each completed year of uninterrupted service.
The employer must pay the retrenched employee the following payments:
Any outstanding/accrued leave due (not yet taken); as well as
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