Retrenchment is lawful in South Africa — but only if it is both substantively justified (a genuine operational need) and procedurally fair (a proper consultation process under Section 189 of the Labour Relations Act). Most retrenchments that fail at the CCMA or Labour Court fail on process.
When does Section 189 apply?
Whenever an employer contemplates dismissal for operational requirements — economic, technological or structural needs of the business. If 50 or more employees (or specified thresholds in larger firms) may be affected, the stricter Section 189A facilitation regime applies.
The consultation process, step by step
- Written notice inviting consultation — Section 189(3) prescribes what this notice must contain: the reasons for the proposed retrenchment, alternatives considered, the number of employees affected, the proposed selection criteria, the timing, and proposed severance pay.
- Genuine consultation — with the union, workplace forum or affected employees. Consultation must be a joint, good-faith attempt to reach consensus, not a announcement of a decision already made.
- Alternatives — short time, redeployment, voluntary retrenchment and salary sacrifice must be genuinely considered and the reasons for rejecting them recorded.
- Fair selection criteria — objective criteria such as LIFO, skills and qualifications. Arbitrary or discriminatory selection makes the dismissal unfair.
- Severance pay — a minimum of one week’s remuneration per completed year of service, over and above notice pay and accrued leave.
Common employer mistakes
- Issuing the Section 189(3) notice after the decision has effectively been taken;
- Consulting with the wrong party (individuals where a union should be consulted);
- Rushing the process to meet a financial deadline;
- Using vague or shifting selection criteria;
- Failing to keep minutes of consultation meetings — the record wins cases.
The cost of getting it wrong
A procedurally unfair retrenchment can cost up to 12 months’ remuneration per employee in compensation, plus legal costs — usually far more than the process would have cost to run properly.
Clifford Levin Attorneys guides employers through Section 189 and 189A processes from first notice to conclusion, and chairs consultation processes as independent facilitators. Contact us before you issue the notice — not after.
