Retrenchment in South Africa – What you need to know

Retrenchment in South Africa – Job security is important for everyone. Moments of uncertainty may arise when the security is threatened. It can become much simpler when you know some of the reasons that cause uncertainty.

Retrenchment and its implications:

The current economic climate has pushed many organisations towards making changes. Restrictions in growth and cutting down on expenses has meant that there have been many more retrenchments.

Retrenchment in South AfricaAlleviating financial burdens often happens by way of retrenchment. By restructuring workforces, this reduces costs. This form of dismissal is through no fault of the employee. Legally, a company may only retrench its employees if it can prove that there are no reasonable alternatives.

Correct Retrenchment procedures:

Some employers may implement retrenchment procedures in an unlawful manner. This may be intentional or due to ignorance. Employees can take legal action if they believe they have been unfairly dismissed, by following a few steps.

The employer must issue a written notice to all employees being considered for retrenchment. This notice must contain:
  • The reasons that led to the retrenchment
  • A list of the alternatives considered by the employer as a way of avoiding having to resort to dismissing employees
  • The number of people who will be affected in the workplace by the proposed retrenchment
  • The method used to select employees who will be retrenched
  • The time when the retrenchment will occur
  • The severance pay that will be paid to employees who will be retrenched. The employer should also detail if any additional assistance will be provided
  • Possibility of future employment by the same employer
  • The number of employees that have been retrenched by the same employer in the year leading up to the current retrenchment
  • The relevant details regarding consultations that will take place to allow employees to address their concerns

Employers must hold consultations with the affected employees and/or their trade union representatives. The retrenchment may not be completed until the consultation process is completed.

  • Employees may suggest alternatives to retrenchment

Employers are obligated to consider the proposals carefully and to provide feedback and reasons for acceptance or rejection.

Severance Pay

A minimum rate of one week’s pay for every year of service must be paid to employees who are being retrenched. Further requirements are involved when more than fifty employees are being retrenched.

Retrenchment cover

This is insurance designed to provide financial support in the event of unforeseen retrenchment.

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