5 Facts About Retrenchment You Need to Know

Retrenchment is a tough thing to have to go through – for both the employee and the employer.

We Are Going Through a Tough Time As It Is

Before heading down the unpleasant road of retrenchment all parties should be aware of the following five central requirements of the Labour Relations Act.

Fact About Retrenchment #1: There Needs to be a Consultation Process

When a company makes the hard decision to restructure, it cannot immediately start retrenching workers. It first needs to consult with staff as it considers the various options. Whether management decides to retrench or opts to redeploy staff or perhaps cut down working hours as an alternative, it should do so only after consultation.


Fact About Retrenchment #2: There Must Be Written Notice

Under section 189 (3) of the Labour Relations Act, an employer is required to notify employees in writing about all relevant information relating to the proposed retrenchment. This should be done even before the consultation starts.

Fact About Retrenchment #3: An Employer Must Prove That All Alternatives Have Been Explored

In arguing the company’s case for retrenchment, management must be able to demonstrate that it has tried all other possible solutions. This is to prove that the actions taken are not arbitrary.

Fact About Retrenchment #4: LIFO is the Rule

When selecting staff for retrenchment, managers must use the “last in first out” (LIFO) principle, subject to skills, experience and qualifications. The employer must make every attempt possible to include affected employees in the new structure of the business. It is not permitted to expect employees to reapply for positions in the new structure.

Fact About Retrenchment #5: Employees Must Be Consulted About Severance Packages

Employers must consult affected workers about what would constitute a reasonable severance package. The package can be no less than one week’s remuneration for each completed year of service plus notice pay. Other than that the package is subject to agreement between the two parties.

In conclusion, retrenchment is something that nobody ever wants to have to consider, but it is sometimes unavoidable. The Labour Relations Act has put these provisions in place to make the process as equitable as possible, and it is for the benefit of both parties to be aware of them and abide by them.

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