Retrenchment is a dismissal for the employer’s operational requirements — economic, technological, structural or similar needs. It is not about your conduct or performance, and the law sets out a process and minimum payments.
The process: consultation comes first
Under section 189 of the Labour Relations Act, the employer must consult before retrenching. It must give written notice inviting consultation and disclose relevant information, including why retrenchments are needed, alternatives considered, how many people are affected, how they will be selected, and the proposed severance pay. You or your union can make proposals.
What you should receive
- Severance pay — at least one week’s remuneration for every completed year of continuous service (BCEA section 41). Many employers and bargaining councils pay more.
- Notice or notice pay — one to four weeks depending on how long you worked there, or longer if your contract says so.
- Leave pay — payment for annual leave you have accrued but not taken.
- Any other amounts owed — salary up to your last day, pro-rata bonus if your contract provides for it, and commission earned.
Tax on your package
Severance benefits are taxed using the retirement lump sum tax table, which has a tax-free portion. Your employer must get a tax directive from SARS before paying. Leave pay and notice pay are taxed as normal income.
Claim UIF
You can claim unemployment benefits from the Unemployment Insurance Fund, generally within 12 months. You earn one credit day for every four days you worked as a contributor, up to 365 days. Your employer must give you a completed UI-19 form.
If you think it was unfair
If there was no genuine operational reason, the selection was unfair, or the employer did not consult properly, you can refer a dispute to the CCMA or your bargaining council — generally within 30 days of dismissal.