Can I retrench only one employee?

Yes. Section 189 applies to the retrenchment of any number of employees, including a single employee. There is no minimum headcount. The same consultation, disclosure, selection, and severance obligations apply regardless of whether you are retrenching 1 or 49 employees. Section 189A only applies from 10 or more employees in qualifying businesses.

Can I retrench an employee who is on sick leave or maternity leave?

Employees on sick leave can be included in a retrenchment process, provided the retrenchment is not motivated by their illness or absence. Employees on maternity leave present a higher risk — they are protected against dismissal connected to their pregnancy or maternity leave, and any retrenchment during this period will be scrutinised carefully. SBHR strongly recommends obtaining professional advice before including an employee on maternity leave in a retrenchment process.

Does an employee who refuses a suitable alternative position forfeit their severance pay?

Yes. If an employer offers an employee a suitable alternative position and the employee unreasonably refuses it, the employee forfeits their right to severance pay under Section 41(4) of the BCEA. 'Suitable' means broadly comparable in terms of remuneration, status, and working conditions. If the offer is unreasonably inferior, refusal is reasonable and severance pay remains due.

What if we cannot afford to pay the statutory severance?

Financial inability to pay the statutory severance does not exempt an employer from the obligation. However, it is a factor that can be raised in consultation and may result in a negotiated deferred payment arrangement agreed with employees. Paying below the statutory minimum without agreement constitutes a BCEA violation and may be referred to the Labour Court. Contact SBHR before making any decision to pay below the statutory amount.

Can retrenched employees claim from the UIF?

Yes. Employees who are retrenched are entitled to claim unemployment benefits from the UIF. The employer must ensure that the employee's UIF contributions were correctly paid during employment and that a UI-19 form is issued promptly. The employee must register at their nearest Labour Centre or apply online via the Department of Employment and Labour within 6 months of retrenchment.

How long after a retrenchment can we re-hire for the same role?

The LRA does not prescribe a specific period. However, filling the same role within a short period of retrenching an employee who performed that role creates a strong inference that the retrenchment was not genuinely motivated by operational requirements — which exposes you to a substantive unfairness challenge. If business circumstances change and you genuinely need to re-hire within 12 months, offer the position to the retrenched employee first. Document that offer.

What is the difference between retrenchment and redundancy?

In South African law, 'retrenchment' is the term used for dismissal for operational requirements under Section 189 of the LRA — what other jurisdictions call 'redundancy'. There is no separate concept of redundancy in South African labour law. All such dismissals are governed by the Section 189 process and the severance pay provisions of the BCEA.

Can SBHR manage the full retrenchment process on our behalf?

Yes. SBHR manages the full Section 189 retrenchment process for South African SMEs: drafting the notice, facilitating and minuting consultation meetings, applying selection criteria, calculating severance, preparing individual retrenchment notices, completing UIF documentation, and representing employers at any resulting CCMA hearings.

South African employer reviewing retrenchment checklist with HR consultant

FREE EMPLOYER RESOURCE — UPDATED 2025

The South African Employer's Complete Retrenchment Checklist

A step-by-step guide to the Section 189 retrenchment process — covering consultation, selection criteria, severance pay, documentation, and how to avoid CCMA liability.

Retrenchment is one of the most legally complex and emotionally difficult processes a South African business owner can face. It is also one of the most frequently litigated — because procedural mistakes are common and the consequences are severe. A single flawed retrenchment process can result in a finding of automatically unfair dismissal, reinstatement orders, and compensation of up to 24 months' remuneration per employee.

Important

This checklist applies to retrenchment for operational requirements only — economic, technological, or structural reasons. It does not apply to dismissals for misconduct or poor performance, which have different procedures. If you are unsure which process applies, contact SBHR before taking any action.

What's in This Checklist

Section 189 vs Section 189A: Which Process Applies?

The first step is determining whether Section 189 or Section 189A of the LRA applies. The distinction is critical — the two processes have materially different requirements, timelines, and dispute resolution routes.

Factor	Section 189 (small retrenchments)	Section 189A (large retrenchments)
Applies when	Retrenching any number of employees (1 or more)	Retrenching 10+ employees within 12 months in businesses with 50+ employees
Consultation party	Directly with affected employees or their representatives	With a registered trade union, elected employee representatives, or a CCMA-appointed facilitator
Facilitation	Not required	Either party may request CCMA facilitation; if requested, it is mandatory
Minimum consultation period	No minimum period prescribed; must be meaningful	60 days from the date of the first consultation meeting
Strike rights	Employees may not strike over a S189 retrenchment	After the S189A process, employees may strike or the employer may lock out if no agreement is reached
Dispute resolution	Employees may refer an unfair dismissal claim to the CCMA	Disputes go directly to the Labour Court, not the CCMA

WARNING: If Section 189A applies to your retrenchment and you follow the simpler Section 189 process instead, the entire retrenchment is automatically procedurally unfair. This is one of the most common and expensive mistakes South African employers make in large-scale retrenchments. When in doubt, contact SBHR.

Before You Issue Any Notice: Pre-Retrenchment Obligations

Before issuing a Section 189 notice, you must be able to demonstrate that you have genuinely explored alternatives to retrenchment. This is not a formality — the CCMA and Labour Court assess whether alternatives were meaningfully considered when evaluating the substantive fairness of a retrenchment.

Alternatives to Retrenchment That Must Be Considered and Documented

Reducing working hours or implementing short-time arrangements
Temporary lay-off with agreement from employees
Implementing a pay freeze or temporary salary reduction (requires employee consent)
Redeployment of affected employees to other roles in the business
Offering voluntary retrenchment or early retirement packages
Placing a moratorium on new hiring
Reducing overtime and contract worker hours before retrenching permanent staff

SBHR TIP: Document every alternative considered and the reason it is not viable for your specific business circumstances. This documentation is your first line of defence if the substantive fairness of the retrenchment is challenged at the CCMA or Labour Court.

Step 1: Issuing the Section 189 Notice

The Section 189 notice is the formal document that initiates the retrenchment process. It must be issued in writing to all potentially affected employees before any decisions have been made. Issuing the notice after the decision to retrench has already been taken is a procedural defect.

Mandatory Disclosures in the Section 189 Notice

Required Disclosure	What the Notice Must State
The reasons	The economic, technological, or structural reasons that make the retrenchment necessary
Alternatives considered	What alternatives to retrenchment were explored and why they are not viable
Number affected	The number of employees likely to be retrenched and the job categories affected
Proposed selection criteria	The criteria the employer proposes to use to select which employees will be retrenched
Proposed timing	The proposed date when retrenchments will take effect
Severance pay	The proposed severance pay and the basis for the calculation
Benefits and leave	How accrued leave, outstanding benefits, and notice pay will be dealt with
Assistance offered	Any assistance the employer is able to offer: retraining, redeployment, outplacement support
Invitation to consult	An invitation for employees to engage in consultation and make counter-proposals

WARNING: The Section 189 notice must be issued to employees before any decision to retrench has been finalised. The purpose of consultation is to allow employees to influence the decision — not merely to inform them of a decision already made. Issuing the notice as a box-ticking exercise after the decision is taken is automatic procedural unfairness.

CHECKLIST 1: Section 189 Notice

Written Section 189 notice prepared and dated before any retrenchment decision is finalised

Notice issued to every potentially affected employee individually (not just representatives)

Notice states the economic, technological, or structural reasons for the retrenchment

Notice lists all alternatives to retrenchment that were considered

Notice states the number and categories of employees likely to be affected

Notice states the proposed selection criteria

Notice states the proposed timing of the retrenchments

Notice states the proposed severance pay and calculation basis

Notice states how accrued leave and notice pay will be dealt with

Notice states any assistance the employer is able to offer

Signed acknowledgement of receipt obtained from each affected employee

Step 2: Conducting the Consultation Process

The consultation process is the heart of the Section 189 procedure. It must be genuine, meaningful, and conducted in good faith — with an open mind, genuinely willing to consider proposals and to adjust the retrenchment plan in response to them.

Who to Consult With

Where a recognised trade union exists: consult with the union's shop steward or official
Where no union is recognised: consult with employees' elected representatives or directly with affected employees
If there is a workplace forum in terms of the LRA: consult with the forum

What Consultation Must Cover

The reasons for the proposed retrenchment and whether they can be avoided
Alternatives to retrenchment and whether any are viable
The selection criteria and whether they are fair and objective
The severance pay amount and whether it can be improved upon
The timing of the retrenchments and whether it can be adjusted
The possibility of re-employment after the retrenchment
Assistance the employer can provide to affected employees

The LRA does not prescribe a minimum number of meetings for Section 189 (small retrenchments). What is required is that consultation be meaningful — which typically means at least two or three meetings unless the parties reach agreement sooner. For Section 189A (50 or more employees), a minimum of 60 days of consultation is required.

WARNING: A single letter sent to employees and no response awaited is NOT consultation. The CCMA consistently finds against employers who go through the motions without genuinely engaging with employee responses and proposals. Every proposal made by employees must be documented and a written response provided.

CHECKLIST 2: Consultation Process

First consultation meeting held within a reasonable time of issuing the Section 189 notice

Attendance register signed by all parties at every meeting

Detailed minutes prepared for every consultation meeting

Minutes signed by both employer and employee representatives at each meeting

All proposals made by employees or their representatives recorded in writing

Written response provided to every employee proposal — even where the proposal is rejected

Employer demonstrably considered and responded to employee proposals in good faith

Consultation continued until agreement was reached OR both parties agreed that a deadlock exists

If deadlock: written record of the deadlock declaration and the reasons for it

Step 3: Applying Selection Criteria

Once the consultation process is complete and the number of employees to be retrenched is confirmed, you must apply fair and objective selection criteria. The selection criteria must have been disclosed and consulted on during the Section 189 process.

Selection Criterion	How to Apply It	Risk Level
LIFO (Last In First Out)	Employees with the shortest service in the affected pool are selected first	Low
Skills and competency	Retain employees with critical skills; must be based on documented job requirements	Medium
Performance record	Use documented performance reviews; cannot rely on subjective manager opinion	Medium
Attendance record	Documented absenteeism records only; cannot include approved sick or family leave	Medium
Voluntary retrenchment	Offer voluntary packages before applying compulsory criteria	Low
FIFO (First In First Out)	Longest-serving employees selected first. Rarely used; typically unfair unless agreed	High

Protected Categories — Automatic Unfair Dismissal

The following employees may never be selected for retrenchment on the basis of their protected status:

Employees who are pregnant or on maternity leave
Employees who have exercised a right under the LRA (including trade union activity)
Employees who have participated in protected strike action
Employees who have lodged a CCMA complaint or testified in proceedings against the employer

SBHR TIP: Whatever selection criteria you use, document every step. Create a selection matrix showing each employee in the affected pool, their score or ranking on each criterion, and the resulting selection outcome. This matrix is your evidence if the selection is challenged.

CHECKLIST 3: Selection Criteria

Selection criteria agreed with employees during consultation, OR fair criteria applied where no agreement reached

Selection criteria are objective and can be demonstrated from documented records

Selection matrix prepared documenting how criteria were applied to each employee in the affected pool

No employee in a protected category (pregnancy, union activity, CCMA participation) was selected

Selection outcome reviewed before being communicated to affected employees

Step 4: Severance Pay and Final Remuneration

Every retrenched employee is entitled to a statutory severance package under Section 41 of the BCEA. The minimum statutory severance pay is one week's remuneration for every completed year of continuous service. Part-years do not count — only completed years. This sits alongside the wider severance and notice obligations under the BCEA that apply to every dismissal.

Worked Examples

Employee	Calculation	Example
3 years 8 months service	3 completed years × 1 week	R3,000/week × 3 = R9,000
7 years exactly	7 completed years × 1 week	R5,000/week × 7 = R35,000
15 years 11 months	15 completed years × 1 week	R8,000/week × 15 = R120,000

Full Final Pay Calculation

Payment Component	Basis	Tax Treatment
Severance pay	1 week's remuneration per completed year of service	First R500,000 lifetime tax-free. Balance at marginal rate. SARS directive required.
Notice pay	Contractual or BCEA notice period, whichever is longer	Taxed as normal income in the month paid
Accrued annual leave	All unused leave at the daily rate at termination	Taxed as normal income
Outstanding salary	All remuneration earned up to the last day of employment	Taxed as normal income
Pro-rated 13th cheque	Only if contractually guaranteed; otherwise at employer discretion	Taxed as normal income

WARNING: Severance pay above R500,000 in an employee's lifetime is taxable. A SARS tax directive must be obtained for each employee before paying out severance to determine the correct tax withholding. Paying severance without a SARS directive exposes the employer to SARS penalties.

CHECKLIST 4: Severance Pay and Final Remuneration

Severance pay calculated at minimum 1 week per completed year of continuous service

SARS tax directive obtained for each employee before paying severance

Notice pay calculated based on contractual period or BCEA minimum (whichever is longer)

All accrued annual leave calculated and included at the current daily rate

All outstanding salary and allowances calculated to the last day of employment

Any contractually guaranteed 13th cheque or bonus pro-rated and included

Final pay calculation sheet prepared and retained for each retrenched employee

All final payments made on or before the employee's last day of employment

Step 5: Issuing Individual Retrenchment Notices

Once the selection process is complete and the final pay has been calculated, each retrenched employee must receive a formal written retrenchment notice. This is a separate document from the original Section 189 notice.

The Individual Notice Must State:

The employee's name and job title
The date of termination of employment (last day)
The reason for termination: retrenchment for operational requirements in terms of Section 189 of the LRA
The notice period and whether it will be worked or paid out
The severance pay amount and the calculation basis
The accrued leave payout amount
The total final pay amount and the payment date
The employee's right to refer the matter to the CCMA within 30 days if they believe the retrenchment was unfair

CHECKLIST 5: Individual Retrenchment Notices

Individual written retrenchment notice issued to each retrenched employee

Notice states the last day of employment

Notice references Section 189 of the LRA as the basis for dismissal

Notice states the notice period (worked or paid out)

Notice includes the full severance pay and final pay calculation

Notice informs the employee of their right to refer to the CCMA within 30 days

Step 6: Post-Retrenchment Obligations

The retrenchment process does not end when the employees leave. There are several post-retrenchment obligations that must be completed, and remaining staff will need clear communication and ongoing HR support as the business restructures.

UIF Documentation

Every retrenched employee must receive a completed UI-19 form to enable them to claim UIF benefits. The UI-19 must reflect the correct reason for termination (retrenchment), the employee's final remuneration, and the last day of employment.

IRP5 and Tax Documentation

The IRP5 certificate must reflect severance pay as code 3901 distinct from regular remuneration (code 3601). Incorrect coding causes SARS to tax the severance incorrectly.

Re-Employment Preference

If you fill a position within 12 months of a retrenchment, the LRA requires that preference be given to retrenched employees who are qualified for the role. Keep a record of all retrenched employees' contact details.

Record Retention

All retrenchment documentation must be retained for a minimum of 3 years from the date of the retrenchment — including notices, minutes, selection matrices, calculations, SARS directives, and UI-19 forms.

CHECKLIST 6: Post-Retrenchment Obligations

UI-19 form completed and provided to each retrenched employee on or before their last day

UIF termination submitted on the uFiling system within the required timeframe

IRP5 certificates issued with severance pay coded correctly under code 3901

SARS PAYE reconciliation (EMP501) updated to reflect the retrenched employees

Contact details of all retrenched employees retained for re-employment preference purposes

All retrenchment documentation filed and retained for a minimum of 3 years

Remaining employees informed of the outcome and any changes to reporting structures or roles

If an Employee Refers to the CCMA

A retrenched employee has 30 days from the date of retrenchment to refer an unfair dismissal dispute to the CCMA. If you receive a CCMA referral notice, do not ignore it and do not attempt to handle it without professional assistance — our guide to the CCMA referral process covers what happens from here.

The Two Grounds for Challenge

Procedural unfairness

The employer did not follow a fair procedure — did not consult properly, did not disclose required information, did not consider alternatives, or selected employees unfairly.

Substantive unfairness

There was no genuine operational requirement to retrench, or the employer retrenched for a reason other than the stated operational reason.

If your Section 189 process was correctly followed and documented, a procedural challenge should fail. The documentation gathered using this checklist is your evidence. If you have gaps in your documentation, contact SBHR before the CCMA hearing date.

SBHR TIP: SBHR has successfully defended South African employers in retrenchment-related CCMA matters. The key to a successful defence is always the same: complete, contemporaneous documentation that demonstrates each step of the Section 189 process was followed. This checklist is designed to ensure that documentation exists before it is needed.

FAQs

Frequently Asked Questions: Retrenchment in South Africa

Common questions about the Section 189 retrenchment process.

Master Retrenchment Checklist Summary

Use this consolidated summary to confirm that every stage of the retrenchment process has been completed before closing the process file.

Pre-Retrenchment

Confirmed whether Section 189 or Section 189A applies

All alternatives to retrenchment documented and considered

Business case for retrenchment clearly articulated and documented

Section 189 Notice

Written notice issued before any decision is finalised

All 9 required disclosures included in the notice

Signed acknowledgements of receipt from all affected employees

Consultation

Meaningful consultation held with all required parties

Signed minutes and attendance registers for every meeting

Written responses to all employee proposals documented

Agreement reached or deadlock formally declared

Selection

Fair and objective selection criteria applied

Selection matrix prepared and retained

No protected employees selected

Severance and Final Pay

Statutory severance calculated at minimum 1 week per completed year

SARS tax directive obtained

Notice pay, leave, and outstanding salary calculated and paid

Individual Notices

Written retrenchment notice issued to each retrenched employee

Signed acknowledgements of receipt retained

Post-Retrenchment

UI-19 forms issued to all retrenched employees

UIF terminations submitted via uFiling

IRP5 certificates issued with correct severance coding (code 3901)

All documentation filed and retained for minimum 3 years

Facing a Retrenchment? Do Not Do It Alone.

SBHR manages the full Section 189 retrenchment process for South African SMEs — from notice to CCMA defence, including hands-on retrenchment consultation support. One procedural mistake can cost you up to 24 months' remuneration per employee.

Disclaimer: This checklist is for general informational purposes only and does not constitute legal advice. Every retrenchment is different. SBHR recommends obtaining professional advice before initiating any retrenchment process.