What is a retrenchment?

It is a dismissal based on the employer’s operational requirements.

Operational requirements may include the employer’s economic, technological, structural or similar needs.

Examples of such a situation traditionally extends to include the employers’ debts exceeding its income or because employee positions have become redundant as a result of new technology or due to a merger with another business.

*Companies with more than 50 employees may be required to follow a more comprehensive process. This document focuses on the standard process.


4 things to consider before retrenchments

There is not an exhaustive list, but accepted measures besides dismissals can include any of these examples*:

NB: The Labour Relations Act (“LRA”) requires that such measures should first be attempted prior to retrenchments being considered as a last resort.

*these are not in any specific order and other measures may also be investigated

Adjusting working hours
(eg. 4-day work week or half-days)

Eliminating overtime
(eg. Only fixed salaries to be paid)

Eliminating temporary labour
(eg. Permanent staff members to conduct allwork)

Offering early retirement
(eg. Older employees can retire prior to retirement age)

The 4 steps of retrenchment

The 4 steps of retrenchment

10 things that MUST be in the written notice

reasons for retrenchment;
alternatives considered and why they were rejected;
number of employees likely to be affected and their job categories;
proposed method of selection;
the time or period when dismissals are likely to occur;
assistance that the employer will be offering (examples could include offering employees time off to attend interviews, early release should a new job be found, issuing letters of reference);
severance pay proposed;
possibility of future re-employment;
the number of employees employed by the employer; and
the number of employees that the employer has dismissed for reasons based on its operational requirements in the preceding 12 months.

6 mandatory topics for consultations

An attempt must be made to reach consensus on appropriate measures to —

avoid the dismissals;
minimise the number of dismissals;
to change the timing of the dismissals;
ways to lessen the effects of the retrenchment;
the employer and the other consulting party must also try to reach consensus on the method for selecting the employees to be dismissed; and
severance pay for dismissed employees.
6 mandatory topics for consultations

How can we help Employers?


  • We assist with the risk management process prior to the retrenchment decision being made (including investigating alternatives and looking at the business holistically).
  • We implement alternatives where applicable (eg. Reduced working hours)


  • Once retrenchment is the only cause of action, we assist with the entire process from drafting the notice to participating in the consultation process, to calculating severance packages and communicating with the relevant staff/representatives.

Contact us at

010 140 6251

The information shared on this article/blog/vlog should be read and understood within the current legal framework of South Africa. It is meant purely for educational discussion and does not amount to legal advice. For specific legal advice, please consult a legal practitioner prior to application.

Posted in Disciplinary Processes.