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Is a retrenchment like any other dismissal or is there a difference?

by , 10 November 2016
Is a retrenchment like any other dismissal or is there a difference?The current economic conditions have made retrenchments a harsh reality. As the economy continues to move at a slow pace, chances are you may also be forced to restructure your business in the near future. Read on to discover how a retrenchment differs from a dismissal so you can comply with labour law.

If you're still unsure how a retrenchment differs from a dismissal, the Labour Law for Managers Loose Leaf Service has got you covered.

Revealed: the real way retrenchment differs from a dismissal

At a basic level, a retrenchment is just like any other dismissal.

Just like in a dismissal, you've got to have a fair and valid (good) reason to retrench and you've got to follow a fair procedure. If you get both right, your retrenchment will be substantively and procedurally fair.

But if you get either one or both wrong, then you'll be at risk. Your retrenched employees can take you to the CCMA or the Labour Court. You could be ordered to take them back (reinstate them) with or without back pay, or to pay them compensation.

Here are five fair and valid examples of when you may need to retrench your employees:

You'd consider retrenching staff in the following circumstances:

  1. Your business is doing badly and you can't afford to keep on many employees.
  2. Your shareholders insist you must cut costs and show a better profit so they can get a better return on their investment.
  3. You can, with a reasonable investment in new technology or by getting a new machine, operate with fewer staff and make more money.
  4. You've lost a major customer and, with the reduced business, you can't afford to keep on your full workforce.
  5. One division of your business or product line isn't doing well enough and you want to close it down. It'll mean you don't have jobs for the staff who work in that area of the business.

Where retrenchments are quite different from other types of dismissal is in the procedure that you must follow before you can retrench.

With retrenchments, you don't hold a disciplinary hearing or a counselling session. You follow a process of consultation.

What is consultation?

Consultation is the discussion with the potential retrenches (employees that you'll be retrenching) or their representatives on the proposed retrenchments.

The Labour Relations Act (LRA) says consultation must be meaningful.

'The parties must work together to attempt to reach consensus. The courts have regularly said that sham consultations aren't good enough, you can't simply go through the motions,' warns the Labour Law for Managers Loose Leaf Service.

When must you start consulting?

Consultations must start as soon as you think about retrenching. The Labour Court has said this means when retrenchments are reasonably foreseeable

Remember though, following a proper consultation process won't help you if you don't have a good reason to retrench.

The number one mistake employers make when retrenching employees...
If you know how to avoid it, you'll save your company hundreds of thousands of rands in compensation at the CCMA. Find out more here

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