Labour Law Advice

Labour Law Advice on the Topic of Fair Reason and Procedure for Retrenchments in South Africa

It is highly recommended to seek labour law advice before taking steps to retrench one or more employees.  Even if you retrench employees for a fair reason, such as for operational reasons, you must still follow the correct procedure. Understanding factors that render the retrenchments unfair or contradictory to the requirements of the relevant labour law in South Africa is essential to avoid hefty penalties. It thus pays to seek advice first and to get legal help in conducting the necessary retrenchments.

To help you gain a better understanding of when retrenchments are fair and in accordance with the requirements of relevant labour law in South Africa, we briefly discuss specific important issues below.


What Is Seen as Retrenchment?

It is a type of dismissal, but one that is done for operational reasons. The employee is not guilty of anything. Retrenchment may be necessary for a business to become profitable or to reduce its financial losses. It is imperative to conduct retrenchments in a fair manner and according to the procedures as required by the relevant labour law. It is also recommended that you seek advice and assistance regarding the correct procedures to follow in reducing the number of employees in your firm.


 What Is a Fair Reason for Retrenchment?

Operational requirements refer to reasons such as economic, structural, or technological changes in the company that leave the employer no other viable choice than to retrench employees. If the company, for example, struggles with lowered sales or faces closure if the number of employees stays the same, then the employer has fair reason to retrench employees. The firm may have migrated to new technology that has replaced the need for certain employees or the company may need to restructure to make it competitive.

To be fair, the reason for retrenchment must be real and unavoidable. If the company did not consider all possible options and simply retrenched employees that the employer did not want to keep as part of the staff, then according to relevant labour law, the retrenchments were not fair. To avoid having to defend such retrenchments, it is recommended that you seek legal advice as to what is a fair reason, rather than commencing with retrenchments based on what you think might be a fair reason.


What Is the Correct Procedure for Retrenching Employees?

You need to consult with the various employees who will be affected. As an alternative, you can consult with elected representatives, consulting employees, registered unions, or workplace forums on the matter. You need to give written notice to invite relevant employees or parties to discuss the matter. It is essential to disclose information, such as what the meeting will be about, timeframe, and broad outline of the procedures in the notice. You also need to engage in constructive discussions to ensure that a consensus can be reached regarding the proposed retrenchment.

As an employer, you must listen to the proposals of the consulting parties and seriously consider the various options presented. You need to state your reasons for disagreeing and should attempt to reach a workable solution. You cannot randomly choose employees to retrench. You must choose employees based on the selection criteria agreed upon with the consulting parties. As an alternative, you must choose employees based on a set of fair criteria. An example is to choose employees who have been with your company for the shortest period. Only after you have considered all options and the consultation process has been completed can you make your decision to retrench specific employees. At this stage, you must notify the affected employees. Labour law in South Africa provides additional relevant procedures to follow if your company employs more than 50 workers. We strongly recommend seeking advice on the matter, as specific procedures then apply to your firm.

Call 011 234 2125 for labour law advice and assistance with retrenchment matters in South Africa.


Disclaimer: This article is for information purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing – November 2018.

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