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February 12th, 2017 by


Retrenchment can have devastating effects on you and your family. Not only can it severely impact your finances, but it can create extreme emotional turbulence. In many cases, when an employer informs you of their intention to retrench you, it can come as a surprise. This can throw you off knowing what your rights are and understanding what processes the company needs to follow when retrenching you.

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unnamed 2 - 4 Steps Employers Need To Follow To Retrench You

4 Steps Employers Need To Follow To Retrench You

Here are some guidelines of what a company needs to do when they end a contract with you.

1. Consultation

If an employer is considering retrenching members of its staff, the first step will be to set up a consultation. The included parties need to be:

  • You as the employee.
  • A workplace forum.
  • A registered trade union (if the employee is registered with them).

This consultation will need to try and reach a consensus on:

  • Avoiding the dismissal. This can be negotiated by offering to adjust working hours, eliminating overtime, etc.
  • Minimizing the amount of dismissals (if there is more than one).
  • The timing of the dismissal.
  • The way to lessen the effect on the dismissal.

2. Written Confirmation Of The Dismissal

Once the consultation is out of the way, a written document needs to be handed over. This needs to disclose the details of the retrenchment. It will need to include:

  • The reason for retrenchment.
  • Alternatives that were considered.
  • Proposed severance pay.
  • Timing.
  • Assistance offered to the employee.

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3. Negotiation

The employee will then have an opportunity to give feedback to the employer. These need to be presented and responded to in a fair manner. The employer may need to justify their selection process in this meeting. Selection criteria are based on what is considered fair and acceptable practices on the side of the employer. They will need to take into consideration length of service, skills, and qualifications. Most employers work on a last-in first-out principle.

The negotiation also provides the platform for the employee to raise their alternatives. It is in this meeting that they can suggest alternatives like:

  • Reducing wages.
  • Working flexi hours.
  • Becoming an independent consultant and outsourcing the function.
  • Moving to a different position.
  • Decreasing the number of contractors/ labourers.

Should these alternatives not be met, the employer will have no choice but to go ahead with the retrenchment. It is at this point that payment and severance package discussions come into play.

4. Payment

Upon retrenchment, the following payments need to be made:

  • The basic salary.
  • Severance Pay.

Employees are entitled to one weeks’ severance pay for every year of service with the company. Should you refuse the offered severance pay, the employer is entitled to withhold all severance pay.

  • Notice Pay.

Should you have worked for under six months, the notice pay is one week’s notice. If you have been working between six months to a year, it should be two weeks’ notice. Over a year of service is calculated to four weeks notice pay.

  • Outstanding Leave.

The amount of leave days will need to be paid out with the final salary.

  • Pension, provident fund, and bonus.

This will need to be paid on a pro rata basis, depending on your contract.