When the economy is bad or the pandemic has caused you to lose a lot of business, when do you make the call to either close your business, reduce salaries or even think of retrenching people and how to go about doing it? 

During a pandemic, it is a very stressful time for both employer and employee, but when you are forced to cut costs, you need to go about it in the correct manner and follow the rules of the Labour Relations Act of 1995 in respect of retrenching and reduced salaries. 

If after that you still cannot save the business, you need to look at retrenching a % of your employees and here is the right way to go about doing it: 

Basic steps to follow when you are planning to retrench an employee:  

Step 1: The reason for dismissal must be sufficient based on economic, structural or technical needs of the employer. 

Step 2: Allow the employee to approach the CCMA if needed. 

Step 3:  Avoid an unpleasant ending and ensure the employee contract agreements have been met where applicable. 

Step 4: Give your employee a written notice of intent to end their employment contract. 

• 1-week notice if employed for less than 1 month 

• 2-week notice if employed between 1 month and 1 year 
• 4-week notice if employed for more than 1 year 

Financial obligations of the employer: 

Severance pay: 

• When an employee is retrenched, they must be paid 1 week’s pay for each completed year of ongoing service or as per their employment contract, if it is a larger amount. 

Leave & other pay: 

• All of the employee’s accumulated leave days they have left, are to be paid out to them 
• Depending on the employment contract, bonuses and pension funds, etc, must be paid out as per agreement 

Notice pay: 

• If employed for less than 6 months, one week’s notice pay must be paid out 
• If employed between 6 months and 1 year, two week’s notice pay must be paid out 
• If employed for more than 1 year, four week’s notice pay must be paid out 

Read more about Retrenchment and Employment Related Claims post #lockdownSA