Retrenchments

Retrenchment is a form of dismissal due to no fault of the employee, it is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to reducing its employees.

The employer must give fair reasons for making the decision to retrench and follow a fair procedure when making such a decision or the retrenchment may be considered unfair.

When May Employees Be Retrenched?

An employer may retrench employees for “operational requirements”.

Operational requirements means requirements based on the economic, technological, structural or similar needs of an employer, in other words, the business needs of the employer:

• An example of economic needs would include a drop in sales or services of the employer, or closure of business.
• An example of technological needs would include new technology developed that can replace some employees.
• An example of structural needs would include restructuring the business.

When the court has to decide whether or not the employer’s decision to retrench was fair it looks at:

• whether there was a real reason; and
• whether it was unavoidable.

Click here to view a video on retrenchments.