In the past years we have seen employees embarking on nationwide strikes, which meant that there was no operation taking place in most companies due to the nationwide strikes during that period.


The consequences of the employees who embarked on the strikes led to most companies experiencing financial constraints which resulted in them considering “Retrenchment”.


It has become evident that most employers are not well aware of the retrenchment process and how lengthy the process can be, especially if proper procedure is not followed by the employer. In most cases the employer would implement the retrenchment process due to one of the following operational requirements: Structural, economical, technological or similar reasons. The employer normally implements the retrenchment process due to structural and economic reasons, which entails that the company is in a financially distressed position, for example: based on high salaries, or were the company has too many employees in the same position which positions have become redundant.


It is always advisable to employers that before the retrenchment process can be implemented the employer should consider the following alternatives:

→ Implement short time, which means reduction in the working hours for a specific period which cannot be indefinite. Employees will only be paid according to the hours they have worked.

→ Implement a system of lay off, which means that there will be no work for a specific period but the employees will still be under the employ of the employer until such time that there is work available. The employer must bear in mind that the lay off period should not exceed a period of more than 8 weeks.

→ Possible retirement packages for those employees who have reached their retirement age as per their contract of employment or company policy.


In an instance where the employer is registered with a specific bargaining council and some of the employees belong to a trade union, the employer needs to notify the council and also the trade union involved, prior to the implementations.


Should the abovementioned other alternatives not be viable, then the employer will have no other option, but to continue with the retrenchment process. As previously stated, the retrenchment process will be implemented when an employer contemplates dismissing one or more employees for reasons based on the employer’s operational requirements.


The employer must first consult with any person whom the employer is required to consult in terms of a collective agreement, if there is no collective agreement that requires consultation then it must take place with:

→ A workplace forum, if the employees likely to be affected by the proposed dismissal are employed in a workplace in respect of which there is a workplace forum and;

→ Any registered trade union whose members are likely to be affected by the proposed dismissals.


If there are no registered trade unions, the employees likely to be affected by the proposed dismissals or their representatives nominated for that purpose.


In Neuwenhuis v Group Five Roads & others  It is incumbent on the employer to consult the employee as soon as it (i.e. the employer) “contemplates” the possibility of a dismissal. Kotze v Rebel, supra, at p.142C-143E. While there can be no brook with the employer’s entitlement to consider a restructuring exercise and even to take a decision in principle, once the employer has identified retrenchment as a possible consequence of its restructuring process, it is obliged, at that stage, to consult the employee on the issues stipulated in the statute. In Kotze’s case, supra, at p.150H, Conradie J postulated the test as follows: “[45] From a productive point of view the employer wants to be certain of his decision before facing the disruption which it is bound to cause; from an industrial relations point of view, he dare not be certain before he invites negotiation (and thereby makes his intention known). How open or closed an employer’s mind was when he embarked on the negotiation process, can only afterwards be monitored by a court on whatever manifestations of the workings of his mind become available. Despite his own, for the reasons set out above, pardonably strong view, an employer must remain sufficiently flexible to conduct meaningful discussions with his employees. He is therefore obliged to invite input from the employees. If he fails to do this, and fails to give a reasonable opportunity for the employees to make their contribution, he leaves himself small opportunity for arguing before a court that his mind had not been made up.”


The employer must make sure that all employees in relevant departments must be issued with notices prior to the consultation to avoid discrimination being construed by employees and fair procedure adhered too. Following that, the employer and the other consulting parties must engage in a meaningful joint consensus-seeking process and attempt to reach consensus on: (1) the appropriate measures to avoid dismissals, (2) minimizing the number of dismissal and (3) changing the timing of dismissal should be taken into account.


Furthermore, consensus must be reached on the method for selecting the employees to be dismissed. The selection criteria should either be one of the following LIFO principle (Last In First Out) which is often applied or possible skills selection process which has to be fair and objective. Thereafter, it must be indicated to the employees that they will be entitled to their severance package which will be calculated according to the LRA or criteria of the specific bargaining council but normally the severance package is calculated at one’s week pay for every year completed by the employee in the service of the employee.


The employer should disclose relevant information in writing including the reasons for the retrenchment and what other alternatives have been considered and why they were rejected, and also indicate the number of the employees likely to be affected and their job categories. The employer must also indicate the proposed method of selection and what assistance will the employer be offering to the retrenched employees in terms of seeking new employment e.g. using company equipment in terms of sending through C.V’s.


The employer must give the other consulting parties an opportunity to make presentations that must be considered and be responded to.


In conclusion before the employer could start with the retrenchment process in terms of section 189 of the LRA, proper advice should be attained from Labour law expert as the process can be complicated.


Article by: Ernest Masupye

Legal Assistant – Pretoria