Under the current financial climate, retrenchment seems to be a viable option to save businesses from closing their doors. More specifically, since the recent outbreak of the COVID19 virus, it has resulted in many businesses struggling to stay afloat. It seems extremely difficult for employers as they simultaneously juggle the demands of the unstable financial market as well as the imposed government lockdown measures.


Therefore, many employers are being put between “a rock and a hard place” in choosing between whether to retrench staff and keep their doors open or keep their staff and run the risk of closing their doors permanently.


Section 189 and 189A, of The Labour Relations Act, places strict obligations on employers to comply with minimum procedural requirements when commencing retrenchment processes. Should employers fail to comply with the requirements, they could face adverse awards and may have to pay significant amounts in compensation.


Coetzee states the following in his article “Alternatives to retrenchment – are employers obliged to save jobs?” That various Labour law judgments create a duty on the employer to utilise possible alternatives prior to retrenching. Further, if these alternatives are not utilised, it can in certain circumstances result in a dismissal due to operational requirements or retrenchments being unfair.


In the article “There Are Alternatives to Retrenchment” Israelstam states that the law does not permit retrenchments unless they cannot be avoided. South African labour legislation prioritises job retention, therefore it will follow that employers should do everything reasonably possible to avoid retrenching employees.

In line with the above, failing to use an alternative measure which might have been available to employers may result in retrenchments being labelled as unfair which may have serious ramifications for employers at the Labour Court or CCMA.


If Employers choose to retrench, employers would also be liable to pay employees severance pay, notice pay as well as outstanding leave pay which may also be due. Placing more stress on employers if funds are not readily available.


Employers could use several alternatives to retrenching employees, listed below are some of the alternatives that may be used:


  • Negotiate a reduction in salaries


Employers could either negotiate reductions in salaries or changes in contracts for a period, to allow the business to retain its staff as well decrease its staff salary bill. One would have to take into account that all employees would have to be consulted in regard to the reduced salaries. Further, if there is a union representing the workers, the said union would have to be part of the negotiation process. In the event of the employer’s industry falling under the jurisdiction of a bargaining council and the salaries of employees being regulated by a collective agreement, the employer would have to apply for an exemption to the same bargaining council to have salaries reduced.


  • Short time


The use of short-time involves shortening the hours in a working day or the number of working days in the week. Prior to placing short-time into effect, the employees would have to be consulted, given notice and further, the effect of the implementing short-time would have to be applied unilaterally to all employees.


  • Transferring of employees to other departments


Employers could also utilise in house training measures to allow for employees to be trained and moved to other departments or branches of the employer, which may require additional support. Another option would be to utilise employees to carry out services that would usually be outsourced to decrease the expenses of the business. However, one must be mindful that employees must be advised of the criteria for the selection process of transferring and training selected employees. Further that these criteria must not be discriminatory.


  • Preventing over time measures in order to save costs.


By reducing the overtime payout of the business, the costs of the salary bill will be significantly decreased.


  • Extending the period of unpaid leave or Laying off of employees


The above can be used in conjunction with various other measures in order to decrease the costs of a business. However, both of these measures would have to be agreed to by both employers and employees.


The above list is not final, and there are various other measures, however, should employers not be able to find alternative measures the employer would have to follow retrenchment procedures. It must be noted that prior to commencing retrenchment procedures, employers should consult an experienced and reputable labour-law consultant in order to aid in these procedures.