5 Steps to retrench staff by the book

By David Crystal, Crystal Labour Solutions

how to retrench staff
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Unfortunately, a number of businesses have become COVID-19 casualties, faced with the difficult (an often unthinkable) decision of having to retrench employees, either because they are closing their doors or they’ve had to downsize and cut costs. This process is not pleasant for both employee and employer, however, management can ensure that fair labour principles are applied, and that the wellbeing of staff is prioritised. Here are five ways (for companies with less than 50 employees) to make sure that best practice – according to Section 189 of the Labour Relations Act – is followed.

1. Consult

Communication and two-way engagement are essential. Firstly, it is imperative that you have legitimate reasons for the retrenchment process such as business closures, restructuring or economic factors. Bear in mind that when a court assesses the process, it will look closely at these elements as well as whether the retrenchment could have been avoided. Next, consultation is critical, be it directly with employees, trade unions or elected representatives. Here, employees can put forward recommendations/suggestions related to the process and discuss these with the employer. A written notification must be drafted, inviting employees to consult.

2. Give employees a voice

Listening to employees and understanding their needs is pivotal to this phase. The notice should outline why the decision was made to retrench, what alternatives were considered, what criteria will form part of the process and what proposed timelines will look like. Available assistance such as pay-outs etc. should also be included. It is essential that employees are able to feed back on the stipulations contained in the notice – and anything else related to the retrenchment – and that employers respond accordingly. Further to this, employees have the right to request additional information (company financials included.)

3. Explore every possible option

Make the most of the consulting process by discussing the various options available to possibly avoid retrenchment, such as reducing work hours, early retirement or voluntary retrenchment. Feasible ways to minimise the impact of the retrenchment (time off to apply for other positions etc.) should also be addressed – First in First Out (FIFO) need not be the only consideration. The final criteria utilised to determine who will be let go must be fair and objective, and better yet, agreed upon with consulting employees.

4. Compensate fairly

The Labour Relations Act states that employees should receive 1 week’s pay for each completed year of service. Employees can ask for more, and if the amount in contracts or other documentation is larger, the employer must follow through. Leave and notice pay must also be allocated, this pertains to time off that has not been taken yet as well as pay that corresponds with how long the employee has been there. Also be aware that there may be other payments contained in employment contracts like pro-rata pensions etc., and let employees know that once they are retrenched, they do qualify for unemployment benefits (UIF).

5. Do the right thing

Don’t be that company. Once the consultation process is completed and all alternatives have been looked at, employers can then let affected employees know that a decision has been reached. Ensure that psychological/emotional support is on offer; coupled with lockdown, depression and anxiety are rampant. Be a reference, write a stellar recommendation letter and ensure that all documentation, especially for UIF and medical aid transfer, is ready to go to make the process as seamless as possible.

If due process is followed, and compassion and empathy is shown, there won’t be a need for an employee to go to the Commission for Conciliation, Mediation and Arbitration (CCMA) or a Bargaining Council. If an employee does feel that his/her rights were compromised, a dispute must be taken to the relevant authorities within 30 days from the date of retrenchment. If not resolved, the case can be referred to the Labour Court. By being a responsible corporate citizen that embraces the SA Constitutional values of human dignity, equality, social justice and respect, additional proceedings can be avoided and the absolute best can be done for the sake of the employee.


David CrystalDavid Crystal is a seasoned labour law and HR practitioner at Crystal Labour Solutions with extensive experience across Southern Africa, spanning a range of industries including the public, mining and retail sectors.


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