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Mini-Retrenchments under Section 189: A Straight-Talk Survival Guide for South African SMEs

  • The StartUp Legal
  • 12 hours ago
  • 3 min read

When you run a lean shop with fewer than fifty people it is tempting to treat a retrenchment as a quick paperwork exercise but Section one eight nine of the Labour Relations Act is every bit as real for you as it is for the big players. The Commission for Conciliation Mediation and Arbitration has no patience for a shrug-and-sign approach and has no problem writing awards that wipe out an entire year of profit if the process looks rushed or cosmetic.


Large-scale dismissals fall under Section 189A and only hit the radar once an employer’s headcount passes the fifty mark or the dismissal numbers trigger the statutory thresholds. That means any business below that line lives in the original Section one eight nine corridor where there is no CCMA facilitator by default but the duty to consult in good faith remains exactly the same.


Consultation must start the minute a dismissal for operational reasons becomes more than a passing thought. Fire off a written notice that spells out why jobs are at risk then invite the affected crew or their representatives to a first meeting within a day or two. Smart owners space at least a week between sessions so people can test the numbers look at alternatives and circle back. Many practitioners aim for three to four weeks from first letter to final decision because that interval gives everyone room to explore cost cuts bumping or job sharing without letting the uncertainty drag on forever. Courts have blessed that kind of timeline as reasonable for a small scale exercise.


The opening letter should sound like this: “We are staring down a cash-flow crunch caused by lost contracts. We need to talk about ways to save roles before we talk about terminating them. Please meet us on Tuesday at ten in the boardroom to start a consensus process as required by Section one eight nine.” Keep the tone collaborative. In the first meeting ask straight out “What cost-cutting ideas do you have that could keep everyone on payroll?” and be ready to table management’s own proposals. The law wants a genuine hunt for alternatives even if none ultimately stick.


When the search draws a blank and you reach the last-resort stage the severance cheque becomes a math exercise rather than a negotiation. The Basic Conditions of Employment Act sets the floor at a week’s remuneration for every completed year of service and that figure includes basic pay plus benefits such as medical aid contributions. If you offered a reasonable alternative role and the employee turned it down without good reason you may withhold severance but tread carefully because the CCMA will test what “reasonable” looked like in practice.


Skipping any of these beats can be brutally expensive. In April of this year the Labour Court handed down eight months’ salary as compensation to a single hotel manager because his employer treated the consultation as a tick-box event and ignored obvious alternatives. The judgment is a loud reminder that even one unfair dismissal can trigger a payout big enough to knock a small business sideways.


Close your process with a clean script. Send a final letter that records every proposal considered the reasons they failed and the selection criteria used even if only one role is redundant. Give at least two working days for written representations then issue termination and severance on the agreed last day of work. Follow up with a certificate of service and a polite note inviting the employee to apply should positions open in future.


Good paperwork wins cases you never have to fight. Keep a consultation file with signed minutes cost-saving proposals correspondence and proof of payment. Store it for at least three years so you can answer any CCMA query without breaking a sweat.

If the admin feels heavy grab an off-the-shelf mini retrenchment kit that includes template notices meeting agendas and a severance calculator. It is cheaper than a single hour in the arbitration room and it keeps those awards off your balance sheet.


The StartUp Legal offers expert legal services tailored for SMEs, helping you secure a winning edge. For personalized support, book a complimentary consultation: https://calendar.app.google/tWhCzbMBUu1DeVLR7 or email us at hello@thestartuplegal.co.za.

 
 
 

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