Retrenchments are never an easy decision for any business. However, when they become unavoidable, it is critical to follow the correct legal procedures to ensure fairness and compliance with South African labour laws.

The Labour Relations Act 66 of 1995 (LRA) provides a clear framework under Section 189 for conducting retrenchments. Adhering to these guidelines not only protects the rights of the affected employees but also minimises the risk of legal disputes that could arise from an improper process.

The importance of consultation

The first step in any retrenchment process is consultation. As soon as an employer contemplates the possibility of retrenchment, they must initiate a consultation process. This is not merely a formality, but a legal requirement intended to explore alternatives to dismissal and mitigate the impact on employees.

The consultation should involve a workplace forum, any registered trade unions whose members might be affected and the employees who are potentially at risk of losing their jobs. The aim is to engage in meaningful discussions to reach an agreement on various issues, including the possibility of avoiding dismissals altogether, reducing the number of dismissals and determining the timing and method of the retrenchments.

During these consultations, several key issues must be addressed. These include exploring ways to minimise the adverse effects of retrenchment, agreeing on the criteria for selecting which employees will be dismissed and discussing severance pay.

It is crucial to approach these discussions with an open mind and a genuine willingness to consider the suggestions and concerns of the employees and their representatives. The goal is to reach a consensus that is fair and just for all parties involved.

Communicating the decision

Once a decision to proceed with retrenchment has been made, the employer is required to communicate all relevant information to the affected employees in writing. This written communication should include the reasons for the retrenchment, any alternatives that were considered and rejected, the number of employees to be affected and the criteria used for selecting which employees will be retrenched. It should also outline the severance pay that will be provided, any assistance the employer will offer to help the affected employees find new employment and whether there is a possibility of re-employment in the future.

Employee representation and response

It is essential that employees are given the opportunity to make representations regarding the retrenchment process. The employer is legally obligated to consider these representations and provide a response. This ensures that the process is not only transparent but also that the employees’ voices are heard, adding a layer of fairness to the proceedings.

Fair and objective selection criteria

When selecting which employees will be retrenched, it is vital to use fair and objective criteria. The criteria should be transparent and based on factors that are relevant to the needs of the business while being fair to the employees. This might include factors such as length of service, skills, qualifications, or performance records.

Financial obligations

Finally, when it comes to the financial aspects of retrenchment, the employer must ensure that all due payments are made. This includes severance pay, which is typically calculated as one week’s pay for each year of service any outstanding leave, notice pay, and, where applicable, pro-rata payments of bonuses, pensions and provident funds.

A final word

Retrenchments, while difficult, must be handled with care and adherence to legal requirements. By following the procedure outlined in the LRA and ensuring transparency and fairness throughout the process, employers can protect both their interests and those of their employees, mitigating the emotional and financial impact of retrenchment.

You are most welcome to reach out to us for any guidance or assistance you may require.