How to consult and end the employment relationship in a fair manner based on operational requirements (retrenchment)
1. CHECK who should be engaged in the consultation process.
- Is there a collective agreement that applies? If so, an employer must check who should be consulted in terms of the agreement.
- If not, is there a workplace forum in place at the workplace? If there is, an employer must consult with the workplace forum as well as any registered trade union whose members are likely to be affected by the proposed retrenchments.
- If there is no workplace forum, is there a registered trade union whose members are likely to be affected? If there is, an employer must consult with the trade union.
- If there is no trade union at the workplace, an employer must consult with the employees likely to be affected or any representatives they may nominate for this purpose.
2. ISSUE the invitation to consult letter:
- Send the letter of invitation to consult, as per section 189(3) of the Labour Relations Act 66 of 1995 (LRA), to the appropriate party as determined above.
- Ensure that the letter adequately explains the reasons for the proposed retrenchments.
- Ensure that the following issues are covered in the letter:
- The proposed number of employees likely to be retrenched in each job category;
- The alternatives considered before proposing retrenchment and the reasons for rejecting these;
- The proposed timing of the retrenchments;
- The proposed selection criteria;
- The proposed severance pay (the Basic Conditions of Employment Act 75 of 1997 prescribes a minimum of one week’s pay per completed year of continuous service. This offer could possibly be enhanced during the consultation process);
- The proposed assistance to be offered to the retrenched employees;
- The possibility of future re-employment;
- The number of employees employed (prior to retrenchments); and
- The number of employees retrenched in the last 12 months.
- Set a date for the first consultation meeting (as a guideline, a reasonable notice period would be a minimum of 2 days, up to a week).
3. CONVENE the first consultation meeting:
- Allow employees / representatives to make proposals / representations on any of the issues set out in the letter, as well as any other matter relating to the proposed retrenchment/s.
- Listen to and note the proposals. Do not respond immediately.
- Ensure that employees / representatives have a full opportunity to air their views.
- Set a date for a follow-up meeting, at which you will respond to the proposals.
- After the first meeting, consider all the proposals/representations that employees or their representatives have made.
4. HOLD the second consultation meeting:
- Respond to the employees’ proposals / representations.
- If proposals have been made in writing, the employer must respond in writing.
- Try to meet the employee(s)’ proposals as far as practically possible as this will help to demonstrate the employer’s willingness to engage in a consensus-seeking process. If possible, offer other options to try to reach agreement (e.g. additional severance pay, no requirement to work out notice period, )
- Where the employer does not agree with any of the proposals/representations that have been made, the employer must give reasons for disagreeing.
- Try to reach agreement on the details of the retrenchments (who will be retrenched, timing, severance pay, etc.)
- If it is necessary to hold a further meeting, set a date for the final consultation meeting.
- Conduct the final consultation meeting in the same way as the first consultation. Try to reach agreement on all aspects of the retrenchment.
5. FINALISE the retrenchment:
- If agreement has been reached, draft a settlement agreement to be signed by the trade union (if any) or by the individual employees. The agreement must reflect that it is in full and final settlement of all disputes relating to the employment of the employee(s) and the termination thereof.
- If no agreement is reached, issue notice of termination letters to the employees to be retrenched.
- Check that the appropriate notice period has been given to each employee in terms of the contract of employment. If there is no provision in the contract of employment, use the periods set out in the Basic Conditions of Employment Act:
- One week if the employee has been employed for six months or less;
- Two weeks if employed for more than six months, but not more than one year;
- Four weeks if employed for more than one year or if the employee is a farm worker or a domestic worker who has been employed for more than six months.
- Pay each employee a severance package of no less than one week’s remuneration per completed year of continuous service, together with and in addition to payment owing in respect of accrued leave, the final wage / salary payment, and any other amount owing by law or in terms of the employment contract.
- Provide the employee with a certificate of service and a letter of reference.
- Furnish the employee with an unemployment insurance UI-19 form recording the reason for termination as “retrenchment”.
- If applicable, arrange for the employee to withdraw from the company provident fund and for the payment of all monies due to the employee.