A voluntary retrenchment is, in essence, an alternative to a forced retrenchment, whereby an employee volunteers and agrees to be retrenched and subsequently waives his or her rights arising from the termination of his or her services.

Upon starting with the retrenchment process as prescribed by Section 189 of the Labour Relations Act 66 of 1995, employers often start by undertaking a voluntary retrenchment exercise.

The aim of this exercise is to avoid the number of potential forced retrenchments. It is important to note that by undertaking this exercise, an employer implicitly contemplates the need for potential forced retrenchments, which attracts the obligation to commence the formal retrenchment process as prescribed by Section 189 of the Act.

In SACU And Another v Telkom SA SOC LIMITED (2020), the Labour Court, however, held, “Even if a party has reservations about whether there is a need for retrenchments, it must be prepared to engage in consultations on alternatives. Nothing prevents a party from engaging on a provisional basis, by making it clear upfront that its consent to the adoption of certain alternative measures is subject to it being persuaded that retrenchments would otherwise be required.”

The offer of voluntary retrenchment can be made by either the employee or the employer, although in practice, more often than not, the employer makes the offer.

Upon the other party accepting the offer, a voluntary retrenchment agreement is adduced to writing and signed by the parties.

The employee will, however, not waive his contractual rights to enforce the payments and/or benefits agreed upon in terms of the agreement, should the employer default thereon.

In Gbenga-Oluwatoye v Reckitt Benckiser South Africa (Pty) Limited and Another the Constitutional Court found that a clause in such an agreement whereby an employee waives his or her rights to approach the CCMA or Labour Court regarding any dispute that arises from the work relationship despite Section 34 of the Constitution which grants every person the right to access to the courts.

In Hodges v Urban Task Force Investments CC and Others, the Labour Court, however, held that an employee cannot waive his or her right to a fair dismissal in consideration of payments legally owed to the employee. Therefore a voluntary retrenchment agreement will only be valid and enforceable if the employee is paid or granted a “sweetener” in the form of an amount of money or benefits in addition to what he or she is legally entitled to.

Such a “sweetener” might be an enhanced severance package, where, for example, an employee is paid an extra week for every completed year of service. Alternatively, an employer may pay an employee an additional amount as gratuity or continue to contribute towards the employees’ medical aid for a specific period after his services are terminated. Ultimately, the amount and nature of the enhanced package is a matter for negotiation between the parties.


Article by: Ilze Erasmus

Dispute Resolution Official – Port Elizabeth