What the law says
The retrenchment process in South Africa is set out in section 189 of the Labour Relations Act. It is not something an employer can do on a whim. Retrenchment falls under “dismissal for operational requirements”, and the law says the employer must have a genuine business reason and must consult before anyone is let go.
In terms of Section 188 an employer may retrench workers if there is a fair reason based on its operational requirements. Labour Courts have treated retrenchment as something that should happen only when there is no other way to fix the problem, sometimes described as a “measure of last resort”.
Step one: consultation, not just notification
Before anyone is retrenched, the employer must issue a written notice and open consultation with the affected employees or their union. This applies whatever the size of the business: smaller companies with less than 50 employees should follow the same process as the process set out underneath for companies with 50 and more employees.
The consultation has to genuinely try to reach agreement on:
avoiding retrenchments; reducing the numbers of retrenchees; changing the timing of the retrenchments; how the effects of the retrenchment can be softened; the severance package; how retrenchees were chosen.
The employer’s written notice must set out specific detail, not vague reasoning. It has to cover: the reason for the retrenchment; the alternative considered by the company; the number of employees likely to be affected; the selection method used to choose retrenchees; the time when the retrenchment will happen; the severance pay that will be paid; any other assistance that will be provided; the possibility of future re-employment; the number of employees the employer has retrenched in the past year; and the date, time and place for consultation.
Employees must be given a fair chance to respond. The employee must be provided with reasonable time to consider the notice and preferably submit written representations or proposals.
When section 189A kicks in: large-scale retrenchments
If the employer is bigger and the retrenchment is on a larger scale, an extra layer applies under section 189A. This section sets specific headcount thresholds:
| Employer size (total employees) | Section 189A applies if retrenching |
|---|---|
| 50–200 employees | 10 or more |
| 201–300 employees | 20 or more |
| 301–400 employees | 30 or more |
| 401–500 employees | 40 or more |
| 501 or more employees | 50 or more |
Section 189A of the Labour Relations Act sets out the legal requirements for procedural fairness of retrenchment when a company has more than 50 employees and are retrenching those numbers, or if the employer intends to retrench that number of employees within a year.
Where section 189A applies, either side can bring in outside help. In terms of Section 189A of the LRA, firms with more than 50 employees can refer large scale retrenchments to the CCMA for facilitation. A request for facilitation goes to the Registrar, Provincial Office of the CCMA in the province where the dismissals for operational requirements is contemplated. Once lodged, the CCMA will appoint a facilitator to assist the parties engaged in the consultation process.
For smaller-scale retrenchments outside section 189A, there is no automatic facilitation, but a worker who believes the process was unfair can still approach the CCMA for conciliation if they feel the retrenchment was unfair.
One recent change worth knowing: government has been amending the rules on procedural challenges during consultation. The reform removes the ability to rush to court mid-process, with the department saying the repeal of section 189A(13) does not remove the right to challenge procedural unfairness but restores balance by allowing such challenges to be brought more effectively after the retrenchment, through ordinary unfair dismissal proceedings.
Notice period and severance pay
Once consultation is genuinely exhausted and retrenchment goes ahead, two separate payments come into play.
Notice period is governed by the Basic Conditions of Employment Act and depends on how long you have worked for the employer. The exact weeks owed by length of service are covered in this site’s dedicated notice period guide. Check that before assuming a figure.
Severance pay is a fixed statutory formula, not a discretionary amount. In terms of the Basic Conditions of Employment Act, an employee must be paid one week’s salary for every year worked. That is the legal floor, not a ceiling: nothing prevents the employer from paying a better severance package. On top of severance, leave credits and pension as well as a pro rata service benefit should also be paid out.
There is one catch employees often miss. If an employee is offered a different type of employment even with another company and does not take up the offer, he may forego the severance package. Read any redeployment or alternative-role offer carefully before turning it down.
Alternatives the employer should have considered
Fairness is not only about paperwork. Courts also look at whether the employer genuinely tried other options first. In determining fairness of a retrenchment, courts will look at a genuine attempt on the employer’s side to do all in its ability to solve the company’s problems and that no other remedy is available, except retrenchments.
Two state-backed alternatives are meant to be raised during consultation. Productivity SA runs a turnaround support mechanism, and employees and trade union representatives should enquire whether the company contacted Productivity SA when they start consultations. There is also a training layoff scheme, where employees are put on short working hours and provided with training, should this prove to be a solution, instead of losing their jobs outright.
If the process wasn’t followed properly
If you think the consultation was a formality rather than a real negotiation, or the selection criteria were unfair, you can challenge it. Small-scale disputes go to CCMA conciliation first. Section 189A disputes can also involve the Labour Court once facilitation has run its course. Keep every notice, letter and consultation record the employer gives you. You will need them if you refer a dispute.
While you are out of work, you can also draw on UIF benefits if you were contributing, and register as a jobseeker through the Department of Employment and Labour’s employment services.
Where to check officially
For the full legal text and current guidance, go to the Department of Employment and Labour at labour.gov.za. For facilitation requests, disputes or conciliation under section 189 or 189A, contact your provincial CCMA office directly through ccma.org.za.
