When the “Money Monster” rears it’s head – honesty & integrity often go to die
March 29, 2020
Understanding Deeds of Trust
March 29, 2020



• By: Pieter van Zyl  | Director – Bate Chubb & Dickson Incorporated

In the current economic climate, businesses are looking for methods to save costs and reduce overheads. When considering the costs that most businesses face, salaries and wages are often at the top of the list. When a business is under pressure, or needs to be rescued, reducing this expense may be a saving grace. However, labour legislation stipulates onerous procedures which must be followed and a business cannot simply “fix” the problem by reducing staff, without thought of possible legal and regulatory consequences. If an employee is retrenched or dismissed due to operational requirements or incapacity, it is seen as a “no-fault” dismissal, as the dismissal is not due to any fault of the employee.

A retrenchment can be termed a “dismissal for operational requirements”. Operational requirements are the business needs of an employer, which can be (amongst others) economic, technological or structural needs. A drop in sales/clients (economic), machinery that can be purchased to fulfil the function previously fulfilled by an employee (technological) or a business that can be structured more efficiently (structural) may all be valid reasons for retrenching an employee.

Not only must there be a valid reason for retrenchment, but a fair procedure must be followed. Subject to collective agreements with labour unions, employers must consult with employees, workplace forums and trade unions and give written notice for such a consultation with all relevant stakeholders. Employees and other parties to the consultation must be allowed to make representations about the proposed retrenchment. The procedure to be followed in the consultation can be somewhat complex, particularly if the business employs more employees, and it is generally suggested that an attorney specialising in labour law be consulted to determine a fair procedure in specific circumstances. The selection of employees for possible retrenchment must also be based on fair and objective criteria, which may include the “last-in-first-out” principle.

Retrenched employees must be paid severance pay or agree on a severance package with an employer. Employees must be paid at least one week’s pay for every completed year of ongoing service.

In addition, retrenchment must be unavoidable and if another position in the company can be offered to an employee, this must be preferred. If another position in the company is offered to an employee on similar terms during the retrenchment procedure and the employee refuses, no severance pay will be payable in the event that he/she is retrenched.

Medical boarding or dismissal for incapacity can take place due to the inability of an employee to work according to the requirements of his/her job as a result of ill-health or injury. Medical boarding is not an alternative to retrenchment and should be dealt with in isolation.

To dismiss an employee for incapacity, an employer must:
Investigate the extent and cause of injury/incapacity/illness (i.e. nature and cause);
Establish the length of the employee’s absence from work – it is inappropriate to dismiss an employee who is only temporarily incapacitated (i.e. likelihood of recovery/seriousness of injury/illness);
Provide the employee with the necessary assistance in order to perform his/her duties;
If possible, accommodate the employee in a suitable position – an employee’s status and remuneration may alter (i.e. alternative employment).
If an employee has been investigated and assessed as mentioned above, and the employee is still unable to work, the employee may be dismissed for incapacity on reasonable notice. An employee may also apply directly to his/her pension fund or scheme to be medically boarded.

Businesses cannot afford to employ staff that are not needed and that do not fulfil the function that they are employed to fulfil. As long as there are good reasons and a fair procedure is followed, unnecessary staff expense can be avoided.


The contents of this article should not be construed as legal advice.

Situations and specific facts may give rise to specific requirements not considered in this article.

The reader is advised to consult a legal practitioner of his/her choice for advice.