Retrenchment 202 – Frequently Asked Questions

This is the second article containing useful questions and answers in regard to retrenchments.

It would be useful to you if you have not read the first article that I published, or if you do not recall what was contained in the first article, to refresh your memory – the article is available here Retrenchment 101 – FAQ’s – frequently asked questions.

Question 7:  How does one even go about identifying which employees may need to be retrenched?

Depending on the reason why retrenchments are deemed to be necessary in the first place will determine which employees may need to be retrenched.

If the reason for a retrenchment is technological – for example where a machine cuts raw materials where previously this task was performed by individual employees, then those employees that used to manually cut the raw material would be identified for possible retrenchment.

Of course, it needs to be kept in mind that one of those individual employees may well be capable of operating the new machinery and may not need to be retrenched, whilst the remaining employees may have to be retrenched. This is further dealt with in the next question.


Question 8:  Once a group of employees have been identified for possible retrenchment, how do you then decide which of those employees you might be able to retain in your employ and which of those employees may have to be retrenched?

The manner in which you select which employees may be retrenched is by way of a selection criteria. The Labour Relations Act prescribes that a written notice must be issued to the other consulting party to consult on the issues which are set out in that written notice. One of these issues that must be contained in this notice is the proposed method for selecting which employees may be retrenched.

The criteria for selecting which employees may be retrenched must be fair and objective. The most frequently used, and best example of criteria that are fair and objective is that of LIFO ( last in first out). What this means is that those employees with a shorter length of service with the employer are selected for retrenchment before those with longer service.


Question 9:  How long must the consultation process last?

The length of the consultation process is not prescribed. What is prescribed, however, is that the consultation process must take the form of a meaningful joint consensus-seeking process. This means that both the employer and the employee must both explore and debate every possible way for a retrenchment to be avoided if at all possible.

There is thus no prescribed time-frame for parties to achieve this objective- it will depend on the complexity of the matter and all the facts and variables that will have to be considered and discussed by the consulting parties.


Question 10:  Other than the written notice inviting the other consulting party to consult, must anything else be in writing?

As part of the consultation process, the party that is consulting with the employer is entitled to make written representations on any of the issues that are subject to consultation.

If these representations are made in writing, then the employer must not only respond to such representations but must respond to such representations in writing.


Question 11:  What is severance pay; when is it payable, and how much severance pay needs to be paid?

Severance pay is only payable when an employee is being dismissed for operational requirements (i.e. the employee is being retrenched). Severance pay is not payable under any other circumstances.

Not every employee that is retrenched is entitled to severance pay – severance pay is only paid to those employees who have completed at least one year of continuous service with the employer.

The amount of severance pay that must be paid is one week’s remuneration for each completed year of continuous service.


Question 12:  If an employee is retrenched, must an employee still be paid notice pay, and if so, how much notice pay must be paid?

Yes, an employee that is retrenched must still be paid notice pay.
The amount of notice pay that is payable will be determined by the contract of employment concluded with the employee, alternatively, the matter is regulated by the Basic Conditions of Employment Act, which provides as follows:
one week notice pay if the employee has been employed for 6 months or less;
2 weeks if the employee has been employed for more than 6 months but not more than one year; and
4 weeks if the employee has been employed for more than one year.


As indicated above, this is the second of a number of articles dealing with issues relating to retrenchment (See the first article here). Should you, however, have any questions relating to retrenchment that have not been dealt with, please do not hesitate to forward your questions to me.