The Rocky Road to Retrenchment: A Basic Guide for Employees

Updated: Jul 8

What should employees know about retrenchment?

As businesses struggle financially under the weight of the lockdown, it is only a matter of time until many of them will resort to retrenching some of their employees. South Africa’s economy, already suffering from a high unemployment rate, is doomed to endure a recession alongside the rest of the world.

Employees should prepare themselves for the worst-case scenario of losing their jobs once the lockdown lifts and industries are unable to financially support themselves (even with the government’s assistance).

Q&A for Employees on Retrenchment

1. What is retrenchment?

Retrenchment is a dismissal that does not occur as a consequence of fault on the part of the employee but occurs where businesses experiencing economic pressure may need to reduce the number of employees in order to improve business efficiency, increase profits or reduce losses.

2. When may employees be retrenched?

Employees may be retrenched for operational requirements, which are requirements based on the economic, technological, structural or similar needs of an employer’s business.

3. What are the procedural requirements for retrenchments?

As retrenchments are ‘no-fault dismissals’ (i.e. through no fault of the employee), the obligations upon employers are particularly onerous; they must ensure that the retrenchment is based on a fair a reason and is procedurally fair:

  • Once the employer contemplates retrenchment, there is a duty upon the employer to engage in a meaningful, joint, consensus-seeking process with the employees’ representatives.

  • The employer must issue a notice to employees likely to be affected.

  • The employees must be allowed to make representations concerning the matters within the notice.

  • The employer must provide necessary and reasonable information and responses to the employees’ representatives.

  • Reasonable and sensible selective criteria that have been agreed upon between the employer and the affected employees or criteria that are objective and fair must be applied.

  • If the employer decides to retrench, the employer must issue a notice of the proposed retrenchment to the affected employees.

  • If the employer is retrenching on large-scale, there are additional procedural steps that must be taken in terms of section 189A of the LRA.

4. If retrenched what are employees entitled to?

Employees are entitled to the following relief upon retrenchment:

  • Severance pay → one week’s pay for each year of service. If the employment contract stipulates a higher amount or a higher amount is agreed to, then this amount must be paid.

  • Leave → If the employee has not taken annual leave, money must be paid that is equal to the number of days not taken off.

  • Additional pay → depends on provisions in the employment contract. For example, a pension.

  • Notice pay as stipulated in the contract of employment or provided for in the BCEA

5. Do employees still receive severance pay if they refuse alternative offers of employment by the employer?

No. The employee forfeits their right to severance pay should they unreasonably refuse to accept an alternative offer of employment by the employer.

6. Can retrenchment constitute an unfair dismissal claim?

After a notice to terminate the contract of employment is given to the employee(s), they may refer the dispute to a bargaining council or the CCMA.

7. Can I claim from the Unemployment Insurance Fund?

Provided an employee has contributed regularly to the UIF, if the employee is dismissed they may apply for unemployment benefits from this fund.

How can Mediate Works assist?

Mediate Works has a diverse panel of highly experienced experts from enquiry chairpersons, investigators, facilitators, mediators, counsellors and lawyers to assist. We have assisted a number of companies to independently facilitate their retrenchment processes fairly.

We have adapted our processes to comply with the law, your disciplinary framework and the need to comply with the current lockdown regulations. We use secure and efficient online platforms to deliver. Call us now for a chat on 0871505283.