Retrenchment is dismissal driven by the employer's operational requirements - the business restructures, a role is no longer needed, or it cannot sustain its current headcount - rather than anything the employee did wrong. Section 189 of the LRA sets out a mandatory consultation process before any retrenchment can proceed.
What it means
Unlike a disciplinary dismissal, retrenchment is no-fault: the employer must still consult meaningfully on alternatives, selection criteria and severance terms before finalising any retrenchment, and larger-scale retrenchments trigger additional procedural requirements under section 189A.
Where it fits in
Retrenched employees are entitled to severance pay calculated by length of service, which payroll must compute correctly alongside notice pay and any accrued leave payout in the final settlement.
Key rules
- A no-fault dismissal for operational reasons, not employee conduct.
- Requires a mandatory consultation process under LRA section 189.
- Larger retrenchments trigger additional requirements under section 189A.
- Triggers severance pay, calculated by length of service, through payroll.
