Proper Retrenchment Procedure is Essential - FormFactory

Proper Retrenchment Procedure is Essential

The greatest number of cases that employers lose at the CCMA in South Africa arise because the employer failed to follow the legislated retrenchment procedure.

This article, therefore, spells out what employers may do and must do when they contemplate retrenchments. In a nutshell, the retrenchment process to follow is to:


1. factually and rationally establish the reason for the possible need to retrench. This might, for example, be financial losses, unoccupied employees, introduction of new technology that reduces job numbers or business restructuring;

2. ensure that you have solid proof of this reason;

3. identify an objective criterion for deciding which employees might have to be retrenched;

4. identify the employees who might have to be retrenched.


5. issue the potentially affected employees and their trade unions with a notification in terms of section 189(3) of the Labour Relations Act (LRA). This notification explains the reason for possible retrenchment and the need to consult on ways of avoiding it, on the retrenchment notice period and retrenchment package calculation, on the retrenchment criterion and on ways of softening the blow.

6. The notification also provides the employees with information such as proposals for avoiding retrenchment, the number of retrenchments effected during the past 12 months and how many employees could be affected.


7. Meet with the relevant employees to consult. The primary purpose of these consultations is to identify ways of avoiding or reducing the number of retrenchments. This might require only two or three meetings or might require several meetings.

NOTE: Employers are not required to negotiate retrenchments but only to consult with the trade union or other employee representatives or with the employees themselves. The difference between consultation and negotiation is most important:

  • Negotiation means that the parties must reach an agreement before any decision may be made or implemented.
  • On the other hand, the law of consultation provides that the employer must prove that it tried its best in good faith to reach consensus before making its decision. If this has been done the employer does not have to reach an agreement with the employees/representatives but can make the final decision alone.


8. Where viable measures for avoiding retrenchments have been identified you are required to implement these.

9. To the extent that you cannot avoid retrenchments issue a final retrenchment letter that:

  • Refer to the attempts to avoid retrenchment
  • Confirm that this has not been successful
  • State the effective date of the retrenchment
  • Explain the retrenchment package due to the employee and
  • Wish the employee success in the future.

NB: An essential part of the consultation procedure is to share, with the relevant employees, information that:

  • proves the genuineness of the need to retrench and/or
  • will enable the employees to consult fruitfully in the process of seeking alternatives.

Such information could include the relevant company financial statements, the employer’s future order book or details of the new organisation structure.

Above all, due to the highly sensitive nature of retrenchments and due to the very serious costs of non-compliance with the law, it is essential that the retrenchment process is led by someone who is fully conversant with labour law and who is skilled in employee consultations.

BY: Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: Go to: