What is retrenchment in South Africa?
Retrenchment is dismissal for the employer’s operational requirements, meaning the economic, technological, structural or similar needs of the business, rather than the employee’s conduct or capacity. Section 189 of the Labour Relations Act sets the procedure, and section 189A adds rules for large-scale retrenchments.
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Schedule a strategy callThe section 189 consultation process
When an employer contemplates retrenchment, it must consult the parties the Act names, such as a recognised trade union or the affected employees. The consultation is a joint consensus-seeking process on ways to avoid or reduce dismissals, change their timing and soften their effects, and on the selection method and severance pay.
The employer issues a written notice disclosing the relevant information, including the reasons, the alternatives considered, the number of employees affected, the selection method, the timing and the proposed severance pay. Employees must be selected on agreed criteria or, failing agreement, on fair and objective ones.
Large-scale retrenchments under section 189A
Section 189A applies to employers with more than 50 employees that contemplate dismissing at least 10 employees if they employ up to 200, 20 if they employ 201 to 300, 30 if 301 to 400, 40 if 401 to 500, or 50 if more than 500, counting operational dismissals in the previous 12 months.
The CCMA appoints a facilitator if the employer asks for one in its notice, or if consulting parties representing most of the affected employees ask within 15 days. With a facilitator, notice of dismissal can be given 60 days after the section 189(3) notice. Without one, a dispute cannot be referred until 30 days have passed.
Severance pay and disputes
An employee retrenched for operational reasons is owed severance pay of at least one week’s remuneration for each completed year of continuous service, under section 41 of the Basic Conditions of Employment Act. A dismissal without a fair reason or a fair procedure can be challenged, and compensation for an unfair dismissal can reach 12 months’ pay.
Retrenchment when you hire through an EOR
With TopSource as your Employer of Record in South Africa, we run the consultation, notices and severance calculation if a role has to end for operational reasons, so the process meets the Labour Relations Act.
Frequently asked questions
How much severance pay is due on retrenchment in South Africa?
At least one week’s remuneration for each completed year of continuous service, under section 41 of the Basic Conditions of Employment Act.
When does section 189A apply?
When an employer with more than 50 employees contemplates dismissing at least 10 employees for operational reasons, a number that rises in steps to 50 for employers with more than 500 staff. Dismissals in the previous 12 months count towards it.
Can a small employer skip consultation?
No. Section 189 consultation applies to every retrenchment, whatever the employer’s size. Section 189A only adds extra steps for large-scale cases.
Related terms in South Africa
- Temporary Employment Services (South Africa)
- Section 198B Fixed-Term Rule (South Africa)
- BCEA Earnings Threshold (South Africa)
- Restraint of Trade (South Africa)
- Family Responsibility Leave (South Africa)
- Sick Leave Cycle (South Africa)
- Employment Equity Act Reporting (South Africa)
- B-BBEE Scorecard (South Africa)
- Critical Skills Work Visa (South Africa)
- POPIA and Employee Data (South Africa)
- EMP201 Monthly Return (South Africa)