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During the COVID-19 pandemic, many employees faced retrenchment. In this article, we discuss:

  • When can employees be retrenched?
  • What is a fair procedure for retrenchment?
  • Will I get paid if I am retrenched?
  • What can I do if I have been unfairly retrenched?

ALSO READ: The effect of COVID-19 on South African employers and employees

What is retrenchment?

Retrenchment is a form of dismissal due to no fault of the employee. It is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to, more often than not, reducing its employees.

When the business decides to retrench its employees, the employer must give fair reasons for making the decision to retrench and follow a fair procedure. If the correct procedure is not followed when making such a decision to retrench, the retrenchment may be considered unfair.

When can employees be retrenched?

Employees can be retrenched under the following circumstances:

  • Operational requirements based on the business needs of the employer. This can include when the business closes down or when there is a large drop in sales/income. Retrenchment can also happen if technology has been developed to replace certain employees.
  • Often, retrenchments can happen due to the restructuring of the business.

What is a fair procedure for retrenchment?

Before a business can retrench its staff, it must follow a fair procedure for retrenchment. This procedure ensures that everyone is treated fairly during the process.

The employer must consult with the employees who are likely to be affected by the retrenchment, or their workplace forum, registered trade union or elected representatives, or any person elected in terms of a collective agreement. We call these people the consulting employees in a business.

A written notice must be issued by the employer, inviting employees or consulting employees to a meeting or consultation about the retrenchment. The written notice must disclose all the necessary information for such consultation.

The employer and employees must engage in a consensus-seeking process on certain matters contained within the notice.

The employer must allow the consulting employees to ask questions about the matters contained in the notice and other matters relating to the proposed retrenchment and allow them the opportunity to offer solutions.

The employer must respond to the consulting employees’ questions. If the employer disagrees with the consulting employees, it must state the reasons for disagreeing with them.

The employer must select the employees to be retrenched based on a selection criterion agreed with the employees or consulting employees or a selection criterion that is fair and objective.

After the consultation process has been exhausted, the employer may make its decision to retrench, and then issue a notice of retrenchment to the affected employees.

Will I get paid if I am retrenched?

There are several payments that need to be made if you are retrenched. These payments include:

Severance pay – if you are retrenched, your employer must at least be paid 1 week’s pay for each completed year of ongoing service. Note that if you refuse alternative employment with your employer or other employer, you will not be entitled to severance pay.

Leave – an amount of money equal to the annual leave, or time off, that has not yet been taken by the employee must be paid out.

Notice pay instead of working your notice period -

  • if you were employed for less than 6 months, you must be paid 1 weeks’ notice pay;
  • if you were employed for more than 6 months but less than 1 year, you must be paid 2 weeks’ notice pay;
  • if you were employed for more than 1 year, you must be paid 4 weeks’ notice pay.

Other pay – depending on the employment contract this would be any pro-rata payment of a bonus, pension and so on. Make sure to thoroughly read through your contract to ensure any additional payments owed to you are paid out.

Once you are retrenched, you are entitled to claim unemployment benefits (“UIF”).

What can I do if I have been unfairly retrenched?

If you feel like you have been unfairly retrenched. You can file a dispute with the Commission for Conciliation, Mediation and Arbitration (“CCMA”) or a bargaining council.

You must file a dispute to the CCMA or bargaining council within 30 days from the date of retrenchment. If the dispute is still not resolved, you can refer the dispute to the Labour Court.

You can claim that your employer reinstates you, re-employs you in your previous role or in another reasonably suitable work.

Remember that your claim must be practical and possible. You cannot claim for reinstatement or re-employment if the business has closed.

The claim made by the employee must be practically possible. For example, the employee cannot claim for reinstatement or re-employment if the business closed.

The Commissioner will then decide to either dismiss your claim or grant it in full or partly.

There is a limit on the compensation that may be given to you, being a maximum of 12 months, depending on the circumstances.

READ MORE: Unfair dismissals and the CCMA - regulation in discipline

When the court has to decide whether or not your employer’s decision to retrench was fair, it looks at:

  • whether there was a real reason; and
  • whether it was unavoidable. Was the retrenchment aa last resort?

If you need to consult with an attorney about your retrenchment, contact Cavanagh & Richards Attorneys today. Our team of legal experts are experts in the field of labour law will assist you with any legal issues you may have during your retrenchment process.

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