Retrenchment is seen as a no-fault dismissal. In other words, it is done because the company needs to retrench employees.
It’s not because the employee has committed misconduct. However, the proper process must be followed.
What is the process for a lawful retrenchment in South Africa?
The most important part of the process is to consult with employees. This means the employee a document called a Section 189 Notice.
A 189 Notice is generally available for free online via an internet search. An employee must receive a Section 189 notice before being dismissed for operational reasons.
A written invitation to consult with the employer must be issued to the other consulting party (the employee(s)), which must include all relevant information. This information is (but not limited to);
- Reasons for the proposed dismissals;
- Alternatives that the employer considered before proposing the dismissals, and the reasons for rejecting each of those alternatives;
- Number of employees likely to be affected and the job categories in which they are employed;
- Proposed method for selecting which employees to dismiss;
- Time when, or the period during which, the dismissals are likely to take effect;
- the severance pay proposed;
There are three types of reasons of retrenchment that you can go with.
- Structural Retrenchment
- Technological Retrenchment
- Financial Retrenchment
The next important point is to make sure that you have fair selection criteria for dismissing an employee. You must be able to select and justify why certain employees are going to be dismissed for retrenchment.
The most common selection criteria is LIFO: Lasting In First Out. In other words, the last employees that have joined those employees will be retrenched.
This is a fair and objective selection criterion.
It is important to give the employees an opportunity to make representations. You must allow them an opportunity to speak and come up with proposals to avoid being retrenched. You must then genuinely consider these alternatives to retrenchment. Don’t just brush them off, genuinely apply your mind to it.
The key is to try and avoid dismissals where possible. In other words, can you give pay cuts to the employees? Can you structure it on working fewer hours for less pay?
If dismissal is the only option on the table, then there are certain other requirements that need to be complied with for example severance pay needs to be paid to the employees.
Severance pay is a mandatory amount of money that needs to be paid to employees by virtue of the retrenchment.
This is in terms of the Labour Relations Act, it’s non-negotiable.
How do you calculate severance pay?
The minimum requirement is one week for every completed year of service.
It is an important aspect to pay the employee the outstanding leave and any notice pay as well. Also make sure that you give the employee important UIF documents, like the UI-19 form.
Conclusion
Retrenchment can be done however the process must be fair and the lawful procedure must be followed. If it is not followed you run the risk of losing a case at the CCMA or at the Labour Court.
(This article is provided for informational purposes only and not to provide legal advice. For more information on the topic, please contact our offices.)
