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Ending Employment

Retrenchment: The Section 189 Consultation Process

Retrenchment — dismissal for the employer's operational requirements — is a fair reason to dismiss, but only if a genuine, good-faith consultation process is followed first. Section 189 sets the process for all employers; s 189A adds extra requirements (including possible CCMA facilitation) for larger retrenchments.

Key facts

  • Consultation must happen before a final decision is made — issuing retrenchment notices as a formality after the decision is already taken is procedurally unfair.
  • The employer must consult on: ways to avoid the retrenchments, ways to minimise the number affected, the timing, severance pay, and the selection criteria for who is retrenched.
  • Selection criteria must be fair and objective — LIFO (last-in-first-out) is common but not compulsory; skills, experience or other criteria can apply if agreed or objectively justified.
  • s 189A applies to employers with 50+ employees retrenching above a size-linked threshold (or any employer retrenching 10+ employees where the workforce is smaller) — it adds a facilitation option via the CCMA and different dispute timelines.
  • Minimum statutory severance pay is one week's remuneration per completed year of service (BCEA s 41), though a contract or agreement can provide more.

The law that applies

  • Labour Relations Act 66 of 1995 — ss 189, 189A
  • Basic Conditions of Employment Act 75 of 1997 — s 41 (severance pay)

Practical steps

  1. Confirm whether s 189 or s 189A applies based on your employer size and the number of employees affected.
  2. Issue a written notice under s 189(3) disclosing the reasons, alternatives considered, and proposed process before any final decision.
  3. Consult genuinely and in good faith — with a union if there is one, otherwise with affected employees or their representatives.
  4. Agree or fairly determine objective selection criteria before applying them.
  5. Calculate and pay statutory severance pay (BCEA s 41) at termination, in addition to notice pay.

Frequently asked questions

Can I just decide who to retrench myself, or must employees/unions be consulted on selection?

The selection criteria must be consulted on with affected employees or their representatives, and applied fairly and objectively once agreed or determined — deciding unilaterally without consultation is a common ground for a successful dispute.

How much notice of retrenchment must I give?

The consultation process itself must happen with enough time to be meaningful, and the BCEA's standard notice period for termination still applies on top of that — retrenchment doesn't shorten ordinary notice requirements.

Have a specific employee situation?

Ask Chat to Lex. It will take your specific facts and give you a cited assessment — not just the general position above — free.

Ask about retrenchment: the section 189 consultation process

This guide is legal information, not legal advice, and may not reflect amendments after its last review. For advice on your specific circumstances, consult a practising attorney or labour law specialist.