Labour Law

Retrenchment

Retrenchment is dismissal for operational requirements — when an employer cannot afford to keep employees due to economic, technological, or structural reasons. Strict procedures must be followed.

Legal Definition

Section 189 of the Labour Relations Act 66 of 1995 governs retrenchment. The employer must consult employees or their representatives, disclose information, consider alternatives, use agreed selection criteria, and pay severance pay of at least one week per completed year of service.

📖 Constitutional / Statutory Basis: Section 23, Constitution of the Republic of South Africa, 1996; Labour Relations Act 66 of 1995 s189

Practical Example

Company restructures and selects 10 employees for retrenchment using "last in, first out." The employer must consult, disclose financial information, and pay severance. Failure to do this fairly is an unfair dismissal.

Frequently Asked Questions

How much severance pay am I entitled to?

At least one week's remuneration per completed year of service, under s41 of the Basic Conditions of Employment Act. Your contract may provide more.

Can I challenge my selection for retrenchment?

Yes. If the selection criteria were not agreed to or were not fair and objective, you can refer a dispute to the CCMA.

Must I be consulted before retrenchment?

Yes. S189 requires meaningful consultation — the employer must disclose information and genuinely consider alternatives like shorter hours or pay cuts before retrenching.

Related Terms

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