What Is The Procedure for Retrenchment?

Retrenchment in South Africa is a dismissal for operational requirements, and the procedure is set by section 189 of the Labour Relations Act 66 of 1995: the employer must issue a written notice inviting consultation, consult in a genuine joint consensus-seeking process on ways to avoid or minimise the dismissals, apply selection criteria that are fair and objective or agreed, and pay severance of at least one week’s remuneration for each completed year of continuous service under section 41 of the Basic Conditions of Employment Act 75 of 1997. Large-scale retrenchments by employers with 50 or more employees fall additionally under section 189A, which brings in facilitation through the CCMA and a 60-day consultation period before notice of termination may be given. A retrenchment can be substantively fair in its reason yet still unfair if this procedure is not followed, and an employee who believes it was unfair generally has 30 days from the date of dismissal to refer a dispute.

What Retrenchment Legally Is (and What It Is Not)

Retrenchment is a no-fault dismissal based on the employer’s operational requirements, defined in the Labour Relations Act as requirements based on economic, technological, structural or similar needs of the employer. It is not misconduct dismissal and not incapacity dismissal; the employee has done nothing wrong, which is why a separate fair procedure and severance obligation attach to it.

Fairness in retrenchment has two independent legs. The first is substantive fairness: is there a genuine operational reason for the dismissals, supported by evidence the employer can produce? The second is procedural fairness: was section 189 actually followed? Failing either leg makes the dismissal unfair on its own, and remedies run from compensation up to reinstatement in appropriate cases.

The terms “retrenchment,” “redundancy,” and “restructuring” are used interchangeably in workplaces, but the legal test is the same operational-requirements test in every case. Whether the employer describes the process as retrenchment, redundancy, downsizing or restructuring, the statutory duties are identical.

The Retrenchment Procedure, Step by Step (Section 189)

The procedure below is the one an employer must follow, and the one an employee should check was followed, before any retrenchment is treated as final.

1. The employer contemplates retrenchment. The obligation to consult is triggered when retrenchment is contemplated, not once it has been decided. A decision taken before consultation begins is a common cause of procedural unfairness.
2. Written notice inviting consultation is issued. Section 189(3) requires the notice to disclose all relevant information in writing: the reasons for the proposed dismissals, the alternatives considered and why they were rejected, the number of employees likely to be affected and their job categories, the proposed selection method, the timing, any severance pay proposed, any assistance offered, and whether the employer intends to re-employ in future.
3. The employer identifies who it must consult with. In order of preference: any person named in a collective agreement, then a registered trade union with members affected, then a workplace forum, then the affected employees or their nominated representatives.
4. Meaningful joint consensus-seeking consultation takes place. The parties must genuinely attempt to reach agreement on avoiding the dismissals, minimising the number, changing the timing and mitigating the effects, as well as on selection criteria and severance. Consultation is a conversation, not a notification.
5. Alternatives are properly explored and recorded. Short time, reduced overtime, a hiring freeze, redeployment to vacancies, voluntary retrenchment packages, early retirement, unpaid leave and pay restraint should each be considered and the outcome minuted.
6. Selection criteria are applied. Criteria must be agreed or, failing agreement, fair and objective. LIFO (last in, first out), skills and qualifications, attendance and disciplinary record, and operational need are commonly accepted. Selection on the basis of race, sex, pregnancy, union membership or having exercised a right under the Act is automatically unfair.
7. The decision is taken and notice of termination is given. Contractual or statutory notice under section 37 of the BCEA applies: one week for under six months’ service, two weeks for six months to a year, and four weeks for a year or more.
8. Final payments are made. Severance, notice pay, accrued leave pay, pro-rata bonus where applicable, and a certificate of service.
9. Exit documentation is issued. A certificate of service under the BCEA and the UI-19 form the employee needs to claim UIF benefits.

Section 189 vs Section 189A: Which Procedure Applies

Section 189A is the additional layer that kicks in for larger retrenchments. The threshold depends on the size of the employer’s workforce and the number of employees to be dismissed, on a sliding scale set out in the Act.

Feature	Section 189 (small-scale)	Section 189A (large-scale)
When it applies	Employers below the section 189A employee and dismissal thresholds	Employers with 50 or more employees, where the number to be retrenched meets the sliding scale in the Act
Consultation period	No fixed statutory minimum — must be genuine and meaningful	A 60-day period generally applies before notice of termination may be given
Facilitation	Not provided for	A CCMA-appointed facilitator may be requested by the employer or by consulting parties representing the majority of employees
Dispute route	Unfair dismissal referral (CCMA or bargaining council, then Labour Court for operational-requirements disputes)	Labour Court, including the possibility of striking over the retrenchment in defined circumstances instead of litigating
Practical effect	Faster, but the fairness bar on consultation is identical	More structured, with an enforced pause that changes the negotiation dynamic

Severance Pay, Notice and What Else Is Owed

Severance under section 41 of the BCEA sets the statutory floor at one week’s remuneration for each completed year of continuous service with the employer. A contract, policy or collective agreement may provide more; it may not provide less. Unreasonable refusal of suitable alternative employment forfeits the statutory severance entitlement.

Notice pay under section 37 of the BCEA is owed whether the employee works out the notice or is paid in lieu. Accrued annual leave must be paid out in full on termination.

UIF: the employer must issue a UI-19; the employee claims unemployment benefits from the Department of Employment and Labour. Because published UIF guidance is updated periodically, current benefit rates and the earnings threshold should be confirmed with the Department before relying on figures from older guides.

Retirement fund and tax: severance lump sums are taxed under the retirement lump sum tables rather than as ordinary income. An employee should get tax and financial advice before deciding what to do with a pension or provident fund payout, since the timing and structure of the withdrawal materially affect the tax outcome.

Common Procedural Mistakes That Make a Retrenchment Unfair

Most retrenchment disputes are not about whether the employer genuinely needed to retrench; they are about how the process was run. The patterns below come up again and again in CCMA and Labour Court rulings:

• Announcing the retrenchment as a completed decision and treating consultation as an information session.
• A section 189(3) notice that is vague on the reasons, the numbers or the proposed selection method.
• Selection criteria invented after the fact, or applied inconsistently between employees in the same pool.
• Skipping the search for alternatives, or offering an alternative role on materially worse terms without discussion.
• Retrenching a specific individual under an operational-requirements label when the real reason is performance or a personality conflict — this is a disguised dismissal and will not survive scrutiny.
• Failing to consult the correct party where a union or collective agreement governs the workplace.

What an Employee Can Do If the Procedure Was Not Followed

The most useful record an employee can build starts at the consultation stage itself. Raise defects during consultation and in writing; objections recorded at the time carry far more weight later.

An unfair dismissal dispute must be referred to the CCMA, or to the bargaining council with jurisdiction over that sector, generally within 30 days of the date of dismissal. Condonation (permission to refer late) must be applied for if the referral is late, and is not automatically granted. Conciliation comes first. If the dispute is not resolved, operational-requirements dismissals of more than one employee ordinarily proceed to the Labour Court rather than to CCMA arbitration; a single-employee retrenchment may be arbitrated at the CCMA where the employee elects that route.

Remedies include compensation and, in some cases, reinstatement or re-employment. Accepting a severance payment does not automatically waive the right to challenge fairness, but signing a full and final settlement or mutual separation agreement usually does — take advice before signing anything.

A Short Checklist for Employers

• Confirm the operational reason and be able to evidence it with figures or a restructuring rationale.
• Draft a compliant section 189(3) written notice before any meeting.
• Identify the correct consulting party.
• Diarise and minute every consultation meeting, including alternatives raised and responses given.
• Agree or objectively justify the selection criteria, and apply them consistently across the pool.
• Calculate severance, notice and leave correctly, and issue the certificate of service and UI-19.
• Check whether the section 189A thresholds are triggered before setting any timeline.

Burger Huyser Attorneys’ Labour Law practice, run through the Linden, Randburg head office and the firm’s Centurion and Pretoria branches, is set up around exactly this kind of work: CCMA disputes, disciplinary hearings, employment contracts and Labour Court matters. Getting the notice and the minutes right at the start is cheaper and faster than defending the process after the fact.

If you have been handed a section 189 notice, or you are an employer trying to run a retrenchment properly the first time, Burger Huyser Attorneys’ Labour Law team can review the process, the selection criteria and the severance calculation before deadlines start running. The firm works from its head office at 49 First Avenue, Linden, Randburg (011 888 0246 / 061 516 6878, Monday to Friday 7:30am–4:30pm), with branches across Gauteng, and is straightforward about costs and about the prospects of a dispute. With a 4.8/5 average across 250+ Google reviews, clients most often single out that honesty — get in touch early, because an unfair dismissal referral generally has to be made within 30 days of dismissal.

Frequently Asked Questions

What is the correct procedure for retrenchment in South Africa?

The employer must issue a written notice under section 189(3) of the Labour Relations Act inviting consultation and disclosing the reasons, numbers, alternatives considered, proposed selection criteria, timing and severance. It must then consult in a genuine joint consensus-seeking process with the union, workplace forum or affected employees, apply fair and objective selection criteria, give proper notice, and pay severance, notice pay and accrued leave. Employers with 50 or more employees may also fall under section 189A, which adds CCMA facilitation and a 60-day consultation period.

How much severance pay must be paid on retrenchment?

The statutory minimum under section 41 of the Basic Conditions of Employment Act is one week’s remuneration for every completed year of continuous service with the employer. A contract, workplace policy or collective agreement can improve on that but cannot reduce it. An employee who unreasonably refuses an offer of suitable alternative employment forfeits the statutory severance entitlement.

How long does a retrenchment process take?

There is no fixed statutory period for an ordinary section 189 retrenchment. The consultation must simply be genuine and meaningful, which in practice usually means several meetings over a number of weeks. Where section 189A applies, a 60-day period generally runs before notice of termination may be given. Rushing consultation to meet an internal deadline is one of the most common causes of procedural unfairness.

Can I challenge a retrenchment if I have already accepted the package?

Accepting a severance payment does not by itself waive the right to challenge the fairness of the dismissal, but signing a settlement, mutual separation or full-and-final agreement generally does. Because these documents are often presented together with the payment, it is worth having them reviewed by an attorney before signing anything.

How long do I have to refer an unfair retrenchment dispute?

An unfair dismissal dispute must generally be referred to the CCMA or the relevant bargaining council within 30 days of the date of dismissal. Late referrals require an application for condonation, which is not guaranteed. Operational-requirements dismissals affecting more than one employee ordinarily proceed to the Labour Court after conciliation rather than to CCMA arbitration.

Can an employer retrench one specific person?

Yes, a single-employee retrenchment is legally possible where the operational reason is genuine, for example where one role is genuinely redundant. The employer must still follow the full section 189 procedure, and courts look closely at single-employee retrenchments to check that operational requirements are not being used as cover for a performance or personality dispute.