Retrenchment procedure

Retrenchment Procedure: When can an Employer Retrench its Employees?

Retrenchment procedure is a form of dismissal due to an employee’s innocence, it is a process in which an employer assesses his business needs to increase income or reduce losses, leading to a reduction in the number of his employees.

The employer must give a fair reason for his decision to dismiss and act honestly if such a decision or its removal can be considered unfair.

When an employer can retrench all his employees?

The LRA (Labor Relations Act) stated that the employer may dismiss the employees because of certain “operational requirements.”

Thus, employer should be having a real economic or business reason to dismiss the employee, such as:

  •   economic downturn
  •   reducing the demand for the company’s products or services
  •   new technology to replace lower-cost workers

Consultation between employer and employee

The most important part of a redundancy is the consultation between the employer and the employees – the aim is to understand ways to prevent or at least reduce the overall extent of redundancies.

Retrenchment procedure

The employer should also provide employees or their representatives with the accurate information in order to communicate meaningfully with any employer.

Which employees can you retrench?

In order to choose which one of the employee to fire is through the principle of LIFO (“load in – first out”). This means that the last recruited staff is the first to be selected for dismissal.

Other skills development facilitator selection principles include length of service, performance and qualifications.

Can you refuse retrenchment?

You can, of course, rewrite the cut, which means that the negotiation is deadlocked.

If you are the only one who has been reduced, you can submit the dispute to arbitration or an employment tribunal, even if the removal procedure follows Section 189.

If you are laid off, your employer may charge upon as a lump sum for the termination of certain services.

As of March 1, 2011, special tax costs related to severance pay are introduced, of which the first 315,000 R severance pay is not subject to tax.

How much money do you get when you retrench?

By law, your employer must offer you a dismissal agreement that includes a minimum pay of one week’s salary for each full year of service, and reimburse you for unused vacation.

If you are a member of a company pension fund, your pension savings must be paid out according to the fund’s articles of association.

By retrenchment procedure law, the employer is obliged to pay the dismissed employees a “dismissal”, which is the weekly wage for each year worked. This amount may be higher than stated in the employment contract or if the rate in the sector is higher due to the CAO. For more information visit our Website.

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