A retrenchment is a no-fault dismissal based on an employer’s economic, technological, structural or similar needs.
There are a variety of reasons why an employer may wish to retrench a domestic worker. For example, a retrenchment may become necessary:
All of these constitute valid reasons to retrench a domestic worker. There may also be many other economic, technological or structural reasons to dismiss a domestic worker and there is no closed list of reasons in this regard.
Retrenchment should not, however, be used to effect dismissals for poor work performance, for other forms of misconduct or for incapacity. A different procedure is required for such dismissals and any retrenchment on that basis would be unfair and may entitle the domestic worker to compensation or reinstatement at the CCMA.
When effecting a dismissal for operational requirements, the process commences with the issuing of a section 189(3) notice (i.e. an invitation to consult). That notice must set out the reason for the proposed retrenchment, the proposed severance pay and the alternatives to retrenchment that have been considered by the employer.
The purpose of the notice is to invite the domestic worker to consult on measures to avoid the dismissal, to change the timing of the dismissal or to mitigate the adverse effects of the dismissal.
Care must be taken to explain the section 189(3) notice to domestic workers who have difficulty reading.
The term ‘consult’ does not mean that the employer and the domestic worker must agree on the retrenchment, but the employer must nevertheless constructively engage with suggestions made by the domestic worker pertaining to the retrenchment and should respond in writing to suggestions that are made.
For example, a full-time domestic worker may suggest working on a part-time basis to avoid retrenchment. If this is accepted by the employer then this could resolve the issue. If this is not accepted, the employer should provide written reasons why that is not a suitable alternative to the retrenchment.
At least two consultation meetings should be convened with a domestic worker in relation to any proposed retrenchment before notice of termination is given. Should the domestic worker request further consultation meetings that should be seriously considered and in the ordinary course granted.
What happens when consensus is reached during consultation?
If the consultation process is successful, the parties will reach consensus on the proposed retrenchment including the amounts payable and the timing of the dismissal.
Where such consensus is reached, it is advisable to conclude a retrenchment agreement with the domestic worker setting out the date of termination, the amounts to be paid and other relevant information to avoid any future disputes on this issue.
If additional payments are made to the domestic worker, which exceed the mandatory statutory payments set out above, it is preferable to agree that the retrenchment agreement is ‘in full and final settlement of all disputes’ (see the sample retrenchment agreement above).
What happens when consensus is not reached during consultation?
It is often the case that consensus will not be reached in respect of a proposed retrenchment (i.e. the parties are unable to agree on the reason for the retrenchment or the retrenchment package).
If no consensus is reached, then once the consultation process has been completed the employer can proceed to terminate the domestic worker’s employment notwithstanding the lack of agreement in that regard. A notice of termination of employment should be issued to the domestic worker together with a certificate of service. This can be done unilaterally by the employer.
The notice of termination should deal with the date of termination (i.e. the end date of the notice period), the statutory amounts to be paid (as set out below) and any other relevant information (i.e. notice that accommodation will no longer be provided).
Care must be taken to explain the notice of termination to domestic workers who have difficulty reading.
Mandatory Notice Periods & Payments on Retrenchment
A domestic worker who has been employed for six months or less is entitled to one weeks notice of termination (i.e. the termination will only take effect one week after issuing the notice of termination).
A domestic worker who has been employed for longer than six months’ is entitled to four weeks notice (i.e. the termination will only take effect four weeks after issuing the notice of termination).
In the event that the employer does not require the services of the domestic worker during the notice period, the employer may pay the domestic worker what he/she would have earned during the notice period in lieu of the domestic worker working during the notice period.
In addition to the notice period (or payment in lieu of notice), a domestic worker is entitled to the following payments upon termination:
During the consultation process, employers may agree to pay higher severance amounts (e.g. two weeks’ pay per year of service) or to make once-off ex gratia (gratitude) payments to domestic workers to mitigate the adverse effects of the retrenchment, although they are not required to do so.
Employees who are retrenched are entitled to claim UIF Unemployment Benefits (click to see Chapter 7).
Summary of Retrenchment Procedure
The following table provides an example of the steps to be taken in a retrenchment:
RETRENCHMENT PROCEDURE (SUMMARY)
| Step 1: | An informal discussion is held with the domestic worker regarding possible retrenchment and the employer issues a section 189 (3) notice (i.e. invitation to consult). The reason for the proposed retrenchment must be identified. |
| Step 2: | First consultation meeting is held with domestic worker: * discuss reason for proposed retrenchment; * discuss intended timing of retrenchment; * discuss intended notice period and when termination will likely take effect; * discuss possible alternatives to retrenchment (if any); * discuss severance payments being considered (i.e. a week per year of service); * discuss any additional payments / ex gratia payments (i.e. payments over and above what domestic worker is legally entitled to); * attempt to reach consensus (agreement on retrenchment, termination date and amounts to be paid). * if no agreement, request domestic worker to submit alternative proposals either verbally or in writing within a few days. |
| Step 3: | Second consultation meeting (only if no agreement reached) * consider and discuss alternatives suggested by domestic worker (if any); * if alternatives suggested, provide written response to those alternatives indicating why they are not viable; * attempt to reach consensus (i.e. agreement on terms of retrenchment). |
IF CONSENSUS / AGREEMENT IS REACHED
| Step 4: | Conclude retrenchment agreement setting out the terms of the agreement * Click to download sample retrenchment agreement available together with this manual. * Advise employee of right to claim UIF & notify UIF of termination of employment. |
IF CONSENSUS / AGREEMENT IS NOT REACHED
| Step 4: | Issue notice of termination of employment & certificate of service. * Click to download a sample notice of termination of employment and certificate of service available online together with this manual. * Determine whether employee will work during notice period or be paid in lieu of notice. * Advise employee of right to claim UIF & notify UIF of termination of employment. |
