Retrenchment guidance

Retrenchment guidance

Human Resources

If you are needing retrenchment advice, particularly around your obligations as an employer in the retrenchment process, then look no further. Here we take a look at some of the guidelines seen as good practice by the Labour Court in a fair retrenchment process.

Remember that you have to follow the retrenchment procedure stipulated by the Labour Relations Act, or potentially pay penalties of up to 24 month’s salary as compensation. However, even if you are unable to reach full agreement with your employees or their union, where applicable, you can still go ahead and retrench once you have completed proper consultations with them – and continue consultations even after the employee has left your services! Obviously, if you can achieve a signed agreement, this would be first prize.

Employer responsibilities – Payment

Your responsibilities when retrenching include the following payments;

  1. Any leave pay
  2. One month’s notice (depending on what their contract says and how long they have been with you) – staff can be asked to work their notice or you can pay them out for this
  3. One week’s severance pay for every completed year they have worked for you

If you do mutual retrenchments, this means you or your adviser will sit with each person one by one and try to get them to accept the retrenchment without having to go through the formal process that the law asks for, which is more time consuming. To do this you would need to offer more in terms of payment (for example one week pay or more) to encourage them to accept.

Good practice step 1 –  Avoidance and reduction of the effects of retrenchment

Management is obliged to implement all or some of the following before implementing any retrenchment measures in order to avoid or reduce the effect of such action:

  • Reduction of the workforce through natural attrition
  • Restriction of new hiring’s by means of recruiting and promoting from within
  • Elimination of all casual labour
  • Non-renewal of short-term contracts of employment
  • Cessation of all overtime work
  • Voluntary retrenchments
  • Retirement of all employees over retirement age
  • Implementation of layoffs
  • Placing employees on short-time
  • Demotion / offering alternative jobs at lower pay or status

Good practice step 2 – Notification procedure

The requirement in this step is to notify employees (or their union) in writing that management is considering retrenchment, allowing them to take part in proper consultations. The notice should give as many details as possible in order to allow employees to make suggestions and representations to management. If there is a ‘representative’ union, they must attend the consultations.

Notifications should include, at the very least:

  • The specific reasons why the retrenchment is being considered, including any pertinent facts and figures and where possible financial and production statistics
  • Measures already taken by management to avoid or limit the retrenchment
  • The proposed number of employees who may be affected
  • The categories of employees who may be affected (foremen, drivers, operators, general workers, anyone over 55, on a final written warning, etc.)
  • The proposed date of the retrenchment
  • The proposed dates and times when employees will meet to consult with management
  • The proposed selection criteria e.g. skill retention, apprentice contracts, LIFO, early / voluntary retirement, temporary workers, employees on short time, etc

If you do not notify correctly, you risk derailing your entire process.

If you are planning any retrenchments or redundancies, please speak to one of our experts in advance. We have retrenchment guidelines for you to follow, and can draft letters to help you through this challenging process.