Employers Must Follow the Correct Procedure when Retrenching Workers

Employers have the right to retrench workers for operational reasons, but many employers use cutbacks to reduce their workforce. However, retrenchment should not be seen as the first option. Dismissing five employees with small salaries will certainly not solve a company’s financial problems. Unless the retrenchment of employees can make a difference in the company’s operations and success, it should not even be a consideration.

Employers often mistakenly believe that they can retrench workers if they expect a slight drop in overall profits, or the company is already experiencing a minor slowdown. They also, by mistake, believe that they can use the word “restructuring” as an excuse for the retrenchment of employees, but various requirements must be met if restructuring is the reason.

It is important to understand that just because new technology is now used in the company, it does not mean that the employer can start to dismiss workers who have not yet completed training in using the new technology.

The employer cannot start with the retrenchment process before conducting a consultation with the employees, and their trade unions or representatives. They must also consult with the employees on the various aspects of the cutback packages.

Retrenchment cannot be used as an opportunity to dismiss undesirable employees. Correct procedure must also be followed in deciding which employees to retrench. Employee cutbacks cannot automatically follow a merger. If an employer retrenches workers for operational reasons, but shortly after fills their positions with people from outside the company, then the retrenchments are not fair.

The retrenchment must be unavoidable and fair procedure is essential. Before the employer can retrench any employees for operational reasons, the firm must, in writing, consult with the employees, people in a collective agreement or workplace forum, and the registered trade union or the representative of the employees.

An agreement must be reached regarding ways in which to reduce or avoid the retrenchments and the effects thereof. If the company has more than 50 employees, then at least 10 workers must be considered for retrenchment. If there are 200 to 300 workers, then the company should, at minimum, consider 20 employees, for 300 to 400, the minimum number is 30, for 400 to 500 at least 40, and for 500 or more employees, the company needs to consider retrenching at least 50 employees. Keep in mind that various other requirements must be met for retrenchments to meet labour law requirements.

Contact us on (011) 234 2125 for legal guidance regarding the correct reasons and procedures to follow when you need to retrench employees in South Africa.


NB: This article is for information purposes only and does not constitute legal advice. You are advised to consult with us before using/relying on this information. All information is relevant to the date of publishing – December 2017.

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