23rd March 2021

Do you need to retrench?

What is retrenchment?

Retrenchment, it's a sort of dismissal, once an employer reviews their business needs to increase profits or limit losses that's when the employer should cut back on the workers operating for the company, however this is not the employees fault.

The employer must provide a fair reasons for making the choice to retrench some employees and follow a good procedure when making this decision or the retrenchment is going to be seen as an unfair retrenchment. Employer could retrench employees for operational requirements (Legal advice Office, 2019). Operational requirements are requirements based upon the technological, structural, economic or similar needs of an employer, in other words, the “organizational desires” of the employer:

  • Economic needs would be part of a drop in sales of the merchandise or services of the employer, or closing of a business.
  • Technological needs would include new technology that has been or that will be developed that may replace the staff.
  • Structural needs would include the restructuring of the business. (Legal advice Office, 2019)

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How to dismiss employees based on the operational requirements of the employer?

Section 189 of the Labour Relations Act (Nicole Myburgh, 2017) is applicable and prescribes a joint agreement seeking method in an effort to achieve agreement on applicable measures (section 189(2))-

  • to avoid the dismissals;
  • to minimize the amount of dismissals;
  • to change the timing of the dismissals;
  • and to mitigate the adverse effects of the dismissals;
  • the method for choosing the workers to be dismissed; And
  • The severance pay for dismissed workers.

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What’s a good procedure for retrenchment?

  • The employer should speak with the workers who are about to be affected by the retrenchment, or the opposite parties that represent the employee or any individual elective in terms of a collective agreement.(Legal Wize , 2020)
  • The employer must provide a written notice that invites the consulting employees to consult and revealing all the required data for such consultation.
  • The employer and consulting employees should have interaction in a very consensus-seeking method on certain matters contained within the notice.
  • The employer must enable the consulting employees to create representations about the matters contained in the notice and different matters regarding the
  • The employer must answer the consulting employees’ representations. If the employer disagrees with the consulting employees, it must state the explanations for arguing with them.(Legal Wize , 2020)
  • The employer must choose the staff to be laid-off based on a variety criteria in agreement with the consulting employees or a selection criteria that is truthful and objective.
  • Once the consultation method has been exhausted, the employer could make its decision to retrench, and so issue a notice of retrenchment to the affected workers. The law provides for extra procedures that the employer, employing over fifty employees, should follow when deciding to retrench. (Legal Wize , 2020)

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What must the notice to consult look like?

The employer must provide notice to the affected employees of the requirement for the proposed retrenchment (Legal advice Office, 2019). This notice must be in writing and contain the required data for the consulting employees to form representations at the consultation (Legal Wize , 2020).

  • the mandatory information includes, but is not restricted to:
  • A given reason for the worker being retrenched;
  • What choices were thought of by the employer to avoid the proposed retrenchment and also the reasons for rejecting these options;
  • the amount of workers that may be affected and their positions; the proposed choice criteria for choosing employees for retrenchment;
  • the time when the retrenchment is probably going to take effect;
  • the proposed severance pay;
  • any help that the employer proposes to supply the workers who are retrenched;
  • the chance of future employment of the workers who are retrenched;
  • the number of employees of the employer;
  • And/or the number of employees that have been retrenched for the last 12 months.

If the info on the notice isn't sufficient, the consulting workers could request the employer to disclose additional information (Legal advice Office, 2019). For example, the employees may request the employer’s audited monetary statements, wherever the explanation for the projected retrenchment is for cutting costs.

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What does it mean when someone consults?

Consultation is a joint agreement-in search of a method among the company and the consulting personnel (Legal advice Office, 2019). This approach means that the consulting personnel need to provide you with recommendations in respect of the proposed retrenchments and the company must respond (Legal Wize , 2020).

Throughout the consultation there are bound matters that has got to be discussed, such as:

  • Avoid retrenchment, for example, no new appointments, early retirements, voluntary retrenchment, adjusting work hours or no overtime;
  • Decrease the quantity of workers to be retrenched;
  • change the timing of the retrenchment, for example, the time required to grasp the information, create representations, and contribute in a very purposeful way;
  • Mitigate effects of retrenchment, for example, once the employer decides to retrench the employees, the employer could give time without work to attend interviews, training, or supplying of reference letters(Legal advice Office, 2019);
  • the choice criteria of that workers are to be retrenched, for example, the principle of “last in, 1st out” (“LIFO”), length of service, skills, qualifications and/or expertise are often used;
  • Severance pay for the retrenched Employers are required by law to pay one week’s pay for every completed year of continuing employment as severance pay, however, the consulting employees could recommend an even bigger amount.

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What sort of payments ought to be created to a retrenched employee?

Severance pay – a retrenched worker should be paid a minimum of one week’s pay money for every completed year of current service (Nicole Myburgh, 2017). However, the employer must pay the retrenched worker the quantity specified in any policy or his/her employment contract, if that quantity is larger.

If a worker refuses alternative employment with the employer or different employer, s/he won't be entitled to severance pay (Nicole Myburgh, 2017).

Leave – a quantity of cash adequate to the annual leave, or time off, that has not however been taken by the worker should be paid out.
Notice pay instead of working the employee’s notice period - if the employee was employed for less than 6 months, s/he should be paid one weeks’ notice pay, if the worker was used for over six months however under 1 year, s/he must be paid 2 weeks’ notice pay; If the employee was employed for more than 1 year, s/he must be paid four

Other pay – counting on the utilization contract this could be any pro-rata payment of a bonus, pension and further on.

Once an employee is retrenched, s/he is entitled to claim state advantages (“UIF”).

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What remedy will a worker have if s/he has been unfairly retrenched?

Once a worker feel s/he has been unfairly retrenched they will refer their dispute to the Commission for Conciliation, Mediation and Arbitration (“CCMA”) or to a bargaining council.

The worker should refer a dispute to the CCMA or bargaining council in thirty days from the date of retrenchment. If the dispute isn’t resolved at conciliation, the worker may refer the dispute to the Labour Court.

  • an worker may proceed with the subsequent claims:
  • Reinstates him/her (with or without back pay); re-employs him/her, either in the work in that s/he was used before the retrenchment or in another fairly appropriate work (without back pay.
  • Or pays compensation to him/her.

The claim created by the worker should be practically possible. For example, the employee cannot claim for reinstatement or re-employment if the business closed (Legal advice Office, 2019).

The Commissioner will plan to either dismiss the employee’s claim or grant it fully or partly. There could be a limit on the compensation which will tend to the employee, being a max of twelve months, relying on the circumstances (Hofmeyer, 2020).

What we can do for you?

We  can handle this whole process for you.

We ensure all the paper work is done

We ensure all the consultations are done within a professional manner.

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