The retrenchment process starts as soon as the employer has identified the need to make a position redundant due to a change in operations or when dismissals is contemplated as a result of operational reasons. The law prescribes that an employer must start a consultation process with all the impacted employees as soon as they contemplate that retrenchment may be necessary – before any final decision is made.
Some background to the concept
Retrenchment should be considered as a last resort and all options to prevent retrenchment or termination of employee’s services should be explored. The operational factors that may lead to retrenchments include:
- Economic needs or reasons
- Structural needs or reasons; and/or
- Technological needs or reasons.
The employer should firstly assess how many people might be affected by the retrenchment process and the reasons as to why these employees are the potential subjects of the unfortunate situation. It should be emphasised that employers cannot use the retrenchment process to get rid of the “bad apples” or “old wood” as the process is linked to the incumbents of the specific positions that are impacted by the process.
It must be noted that dismissals based on operational reasons or retrenchments for short, is deemed to be ‘no-fault’ dismissals.
What is a fair procedure?
As soon as the employees who may potentially be affected have been identified, the employer must commence the consultation process by providing them with a written Notice in which all relevant information regarding the restructuring is shared, including:
- The reasons for or cause of the proposed retrenchments;
- 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 likely to be dismiss;
- 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 dismissed;
- The possibility of the future re-employment of the employees who are dismissed;
- The number of employees employed by the employer; and
- The numbers of employees that the employer has dismissed for reasons on its operational requirements in the preceding 12 months.
At the first meeting the employer should try to obtain an agreement between parties on certain matters such as the time-line, selection criteria, severance pay and administration. The normal process consists of 3 to 4 consultation meetings.
The employer must allow the affected employees the opportunity to make representations in relation to the proposed retrenchment, either oral or written. If the employee makes representations in writing, the employer must respond in writing.
Where the process has been concluded and no alternative was found, the following must be paid to the employees who are dismissed:
- Severance pay of one (1) week for each completed year
- Accrued leave
- Notice pay if the employees are not required to work a notice period.
Conclusion
Employers are best advised to consult a reputable labour law advisor whenever a need to restructure the business arises.