Retrenchments

We have noted that retrenchments, as a result of the dire financial consequences of the lockdown and COVID pandemic, are on the rise.

As a result, we deem it imperative to provide an explanation of the process.

We strongly suggest that legal representation be sought and obtained when commencing with retrenchment or restructuring processes, as the process not only has strict requirements, but generally ends in the CCMA (Commission for Conciliation, Mediation and Arbitration) in any event.

Following the correct procedure, however, can act to prevent negative outcomes – such as twelve months remuneration, being one of the harsher possible outcomes to unfair retrenchments.

The following is a non-exhaustive list of requirements for the retrenchment process:

  • Retrenchment must be approached as a process where the employee is not at fault – in other words it cannot be sought to target a specific employee, but should be sought to restructure a business model to prevent or limit financial losses;

 

  • In conjunction with the aforesaid, retrenchments should take place for ‘operational requirements’ – this does include profits and losses, but cannot be sought solely to increase profits; same should accordingly only be sought when there has been a material change, such as a decrease in clientele or an increase in ‘bad debt’;

 

  • Retrenchments should only be used as a last resort, and cannot, as a result, be considered if another option is available;

 

  • Notice must be provided to employees of an intended restructuring and possible retrenchments, which notice should invite employees to attend a consultation to discuss the process;

 

  • The criteria for selection and retrenchment should be discussed with employees – again, no single employee can be targeted or singled out;

 

  • The consultation process must be open to employees to provide suggestions, as the process seeks to limit retrenchments and find alternatives;

 

  • Should no alternatives be available, the employer may then proceed, in terms of the agreed upon criteria, to notify the employees that are to be retrenched as a result – these criteria must be fair and objective, to say the least;

 

  • By agreement, severance pay may be increased, however, the statutory minimums should be maintained, which payment should also be made, along with any available leave pay, to the employee so retrenched within seven days of their final working day;

 

  • All information in the process, including discussions, should be minuted and/or in written format, and should be provided to employees;

This is, once again, not an exhaustive list.

Should you have any queries herein, or seek assistance, feel free to contact our office.

Written by Keegan Elliott (Attorney)