In the Labour Relations Act 66 of 1995 sections 189 and 189A deals with the procedure of retrenchment.

The Labour Relations Act (LRA) is very specific when looking at this process with special reference to the parties involved and the process that they would have to follow in order for the process to be legitimate. Legislation also distinguishes between small and bigger employers and the process each has to follow when retrenching employees.

Employers should be aware that the reasons for the decisions they have taken to retrench staff are to be very carefully assessed at the CCMA or by the union. It is therefore prudent that employers retrench staff for the right reasons and not try to make up excuses for staff to be retrenched. In giving their reasons employers should always be open and honest in there communication to employees and their unions and should have information such as financials, production etc. available to present to the afore-mentioned parties should they request the information. Disclosure of information forms a very important part of this process and a high premium is placed on the honesty of employers.

Payment of severance benefit

Although the minimum payment for the severance benefit is calculated at 1 week for every year worked the company may negotiate a different benefit with the retrenched employee(s) in that the benefit is calculated to an amount more than 1 week for every year worked. In this regard it is important to be supplied with a copy of the final agreement between the employer and employee to ensure correct payment. In some instances an existing agreement between the employer and the union or the bargaining council may be applicable.