Retrenchment: What Employees Need to Know

Talk of "restructuring" or a letter mentioning section 189 can make your stomach drop. Retrenchment is not about anything you did wrong, but it can feel deeply personal. Knowing the process gives you a voice in it.

What is happening

Retrenchment is dismissal for the employer's operational requirements: economic, technological or structural reasons, such as losing a big contract or closing a branch. The Labour Relations Act 66 of 1995, in section 189, sets out a fair process.

Before deciding, the employer must consult with the recognised union, or with workplace representatives, or with the affected employees themselves. It must give a written notice inviting consultation. That notice should explain the reasons, the alternatives considered, how many people may be affected and in which jobs, how people will be selected, when it may happen, the severance pay proposed and any help offered, such as time off to look for work.

Consultation must be a real attempt to reach agreement. Topics include ways to avoid or reduce job losses (such as short time, transfers or voluntary packages), the selection method, and severance. The selection criteria must be fair and objective. Last in, first out is common, but other fair criteria can be agreed.

Larger employers with more than 50 employees who plan to retrench many people must follow extra rules in section 189A, which can include a facilitator from the CCMA.

Under the Basic Conditions of Employment Act, a retrenched employee is entitled to at least one week's pay for each completed year of continuous service. You may lose this right if you unreasonably refuse other suitable work offered by the employer. You are also entitled to notice (or pay instead of notice), usually one, two or four weeks depending on how long you have worked there, plus payment for leave not taken.

If you believe the retrenchment was unfair, you can usually refer a dispute to the CCMA or your bargaining council within 30 days.

Is this you?

• You received a letter referring to section 189 or possible retrenchments.
• Your employer has called consultation meetings.
• You have been offered a voluntary severance package.
• You are unsure how people are being selected.
• You do not know what severance pay you should receive.
• Your last day is set and you are worried about money.

30-second self-check

Answer yes or no to each question.

• Were you told about possible retrenchment without any consultation meeting?
• Is the way people are being chosen unclear to you?
• Is the severance offered less than one week's pay per year worked?
• Have you been pressured to sign a package quickly?
• Were alternatives, like transfers or short time, not discussed?
• Do you have no clear plan for income after your last day?

0-1 yes: The process may be on track. Stay involved and keep records of every meeting.
2-3 yes: Ask questions in writing and get advice before you sign anything.
4 or more yes: Get labour advice now. You may have grounds to challenge the process.

What you can do next

• Today: Keep every letter and write notes after each meeting. Check your contract and payslips so you know your start date and salary.
• This week: Ask questions in the consultation: why, why you, what alternatives exist and how severance was calculated. Put proposals in writing.
• This month: Before signing, get advice on the package. Apply for UIF as soon as your job ends and update your CV.
• Part of a severance payment may be taxed differently from a salary. A tax practitioner or SARS can explain what applies to you.
• Think carefully before cashing out retirement savings. Speak to an FSCA-authorised financial adviser first.
• Losing a job affects the whole family. Plan together, and look after your wellbeing.

Your tool

Employment Dispute Check - helps you check whether the process you are going through looks fair, what deadlines apply and who to speak to.

When to get professional help

Get help before you sign a package, if the process feels rushed or unfair, or if you think you were selected for reasons other than those stated. Also get financial advice before deciding what to do with a lump sum.
Who can help: your trade union, a labour attorney, Legal Aid South Africa, an FSCA-authorised financial adviser, a tax practitioner, a career coach, a counsellor

Getting help in South Africa

• CCMA (ccma.org.za): facilitates some large retrenchments and hears retrenchment disputes, without charge.
• Department of Employment and Labour (labour.gov.za): UIF claims and the Labour Activation Programme information.
• SARS (sars.gov.za): information on how severance benefits are taxed.
• FSCA (fsca.co.za): check that a financial adviser is authorised.
• Cleared Mind 24-hour Careline 0800 212 146: support for you and your family through the change.