What is retrenchment and Why Does it Matter?
Retrenchment is a form of dismissal due to no fault of the employee. It is a process whereby the employer reviews its business needs to increase profits or limit losses, which leads to reducing its employees.
This article specifically applies to employers who employ less than 50 employees but can also be useful to employers who employ more than 50 employees.
In this article, I will be covering how to do retrenchments in a manner that is legally compliant and fair.
How to do legally compliant retrenchments
- Notification for retrenchments
The employer must issue a written notice inviting the employees (or their representatives) and disclose in writing all relevant information, including, but not limited to-
- The reasons for the proposed dismissals
- The alternatives that the employer considered before proposing the dismissals, and the reasons for rejecting each of those alternatives.
- The number of employees likely to be affected and the job categories in which they are employed.
- The proposed method for selecting which employees are to be retrenched.
- The time when, or the period during which, the dismissals are likely to take effect.
- The severance pay proposed
- Any assistance that the employer proposes to offer to the employees likely to be retrenched.
- The possibility of the future re-employment of the employees who are retrenched
- The number of employees employed by the employer; and
- The number of employees that the employer has dismissed for reasons based on its operation requirements in the preceding 12 months.
Should you require a template for this invitation for consultation letter, you can access it at the following link, https://nxusahr.gumroad.com/l/ghnavj, together with the rest of the DYI retrenchment pack.
When an employer contemplates dismissing one or more employees for reasons based on the employer’s operational requirements, the employer must consult the employees likely to be affected by the proposed dismissals or their representatives nominated for that purpose.
Employers are required to consult with employees or their representatives on the following:
- Appropriate measures to avoid the dismissals.
- Appropriate measures to minimise the number of dismissals
- Appropriate measures to change the timing of the dismissals; and
- Appropriate measures to mitigate the adverse effects of the dismissals;
- The method for selecting the employees to be dismissed; and
- The severance pay for dismissed employees.
The employer must allow the other consulting party an opportunity during consultation to make representations about any matter dealt relating to the proposed retrenchments. The employer must consider and respond to the representations made by the other consulting party and, if the employer does not agree with them, the employer must state the reasons for disagreeing.
Remember to keep records of minutes for all the discussions that are held during the consultations and an attendance register. Upon the employees’ termination of employment, remember to issue the employees with the following.
- Final Agreement Letter
- Annexure A – Retrenchment Calculations
- Service Certificate
- UIF Forms
When engaging in a retrenchment process, consultation with all the employees that are likely to be affected by the retrenchments is important. Keep minutes of the consultations, and allow the consultations to be meaningful dialogs between you and the consulting parties.
If you are contemplating retrenchments in your business and have no idea where to start in terms of the necessary documentations that are required, you can access my DYI Retrenchment pack from the following link https://nxusahr.gumroad.com/l/ghnavj