retrenchments and redundancies
What Are Retrenchments And Redundancies?

Retrenchment” and “redundancy” are terms often used interchangeably, but they have slightly different meanings:

  • Retrenchment: Retrenchment refers to the termination of an employee’s employment by the employer for operational requirements. Operational requirements are defined as requirements based on economic, technological, structural, or similar needs of an organization. Retrenchments are often the result of the employer’s need to reduce its headcount.
  • Redundancy: Redundancy occurs when an employee’s job is no longer necessary. Often due to these technological advancements, changes in market demand, organizational restructuring, or other operational reasons. Unless an employee can be accommodated elsewhere in the organization where his / her skills can still be utilized, redundancy may lead to retrenchment.
Why Is It Important For The Employers To Follow The Right Procedures When It Comes To Retrenchments And Redundancies?

It is crucial for employers to follow the right procedures when it comes to retrenchments and redundancies for several reasons:

  • Legal Compliance: There are legal obligations and requirements set forth in section 189 of the Labour Relations Act 66 of 1995 “(“the LRA”). Failure to comply with the process set out in this section can result in expensive repercussions. This ranging from compensation to reinstatement of retrenched employees.
  • Fairness and Equity: Following the prescribed process fair and equitable treatment of all employees. Fair treatment of employees during retrenchment or redundancy helps maintain morale, trust, and positive employee relations within the organization.
  • Preservation of Reputation: Mishandling retrenchments or redundancies damages an employer’s reputation both internally and externally. Employees who feel unfairly treated may share their negative experiences, leading to decreased employee morale and retention internally and a reputation for unfair employment practices externally.
  • Employee Well-being: The process of retrenchment can be emotionally challenging for affected employees. Following proper procedures allows employers to support employees throughout the process. Providing resources for retraining, counseling, or assistance with finding new employment opportunities.
  • Maintaining Productivity and Stability: Disruptions caused by poorly managed retrenchments or redundancies impacts productivity and disrupt business operations. Following the right procedures helps minimize disruptions and maintains stability within the organization during times of change.
What Are The Legal Aspects South African Employers Must Follow For Retrenchments And Redundancies Of Their Employees?

Section 189 of the LRA sets out the key legal aspects that South African employers must follow:

  • Consultation: Employers are required to consult with affected employees, their chosen representatives, such as trade unions or attorneys before implementing retrenchments. This consultation process must be conducted in good faith. With the aim of reaching an agreement on ways to avoid or minimize the retrenchments, mitigate their adverse effects, change their timing, selection criteria and severance pay.
  • Notification: Employers must provide written notification to all affected employees or their representatives of the proposed retrenchments. The notification must include all the headings set out in section 189(3) of the LRA including the reasons for the retrenchments, the number of employees affected, the selection criteria used, and any measures taken to avoid or minimize retrenchments.
  • Selection Criteria: Employers must use fair and objective criteria when selecting employees for retrenchment. This may include factors such as skills, qualifications, job performance, length of service, and the operational requirements of the business. The selection criteria are a subject for negotiation during consultation.
  • Severance Packages: Employers are generally required to provide retrenched employees with severance pay or severance packages. The amount of severance pay is usually based on the employee’s length of service. It is subject to any collective agreements or employment contracts and company policies. The severance package is a subject for negotiation during consultations.
  • Notice Periods: Employers must provide affected employees with written notice of the retrenchments in advance. The notice period depends on the employee’s contract of employment and the Basic Conditions of Employment Act provisions.
  • Alternative Employment: Employers are encouraged to explore alternative employment opportunities for retrenched employees within the organization or through assistance with job placement services. Should the Employer be able to secure a reasonable alternative which the employee unreasonably refuses, no severance pay may be owing.
  • Avoiding Discrimination: Employers must ensure that the retrenchment process does not accidently discriminate against employees based on factors such as race, gender, age, disability, or union membership.

It’s important for employers to familiarize themselves with the specific provisions of the LRA and seek legal advice if needed to ensure compliance with South African labor laws when implementing retrenchments or redundancies.

Contact Kirchmanns Incorporated for your legal enquiries. Our sought-after firm has a national footprint with experienced attorneys who have contributed towards a well-earned reputation as a successful legal practice.