Retrenchment Is a Last Resort: What Employers Must Consider First

When businesses face financial pressure or restructuring needs, retrenchment is often seen as the most direct solution.

From a commercial perspective, that may seem logical.

From a legal perspective, it is far more complex.

In South Africa, retrenchment is not meant to be a first step. It is a last resort. Employers who fail to properly consider alternatives before retrenching employees expose themselves to unfair dismissal claims, process challenges and costly disputes.

The Misconception: “We Have No Choice but to Retrench”

Many employers approach retrenchments on the basis that:

• the business is under pressure

• costs must be reduced

• roles must be eliminated

While this may be true commercially, the law requires more than a business justification.

Employers must be able to show that retrenchment was not only necessary, but that reasonable alternatives were properly considered and, where possible, explored.

What the Law Actually Requires

Under section 189 of the Labour Relations Act, employers are required to engage in a genuine consultation process.

A key part of that process is consulting on:

• ways to avoid dismissals

• ways to minimise dismissals

• alternatives to retrenchment

This is not a theoretical exercise.

If an employer cannot demonstrate that alternatives were considered seriously and in good faith, the retrenchment may be challenged as unfair.

Why “Last Resort” Matters

The requirement that retrenchment must be a last resort is not just a principle. It is a practical test applied in disputes.

Employees frequently challenge retrenchments by arguing:

• viable alternatives were ignored

• cost-saving measures short of dismissal were available

• the employer moved too quickly to termination

Even where the business is under strain, failure to engage on alternatives can undermine the process.

Alternatives Employers Are Expected to Consider

There is no closed list, but commonly expected alternatives include:

Redeployment

Moving employees into other roles within the business, even if on different terms.

Reduced working hours

Implementing temporary or permanent reductions in working time.

Salary adjustments

Exploring salary reductions, particularly at senior levels.

Voluntary severance

Inviting employees to volunteer for exit packages rather than imposing retrenchment.

Temporary layoffs or unpaid leave

Where appropriate, using short-term measures instead of permanent termination.

Freezing recruitment

Avoiding new hires while reducing headcount through natural attrition.

The Real Risk: Alternatives Are Not Properly Explored

In many cases, employers mention alternatives briefly but do not genuinely engage with them.

Common issues include:

• alternatives are raised but immediately dismissed

• no financial or operational analysis is done

• employee proposals are ignored or not responded to

• the process moves too quickly to termination

This creates a clear line of attack for employees.

The “Tick-Box” Problem

Employers sometimes treat the consideration of alternatives as a compliance step.

For example:

• listing alternatives in a section 189 notice

• briefly discussing them in consultation

• proceeding with retrenchment regardless

This approach is risky.

Consultation requires genuine engagement, not a formal checklist. If alternatives are not seriously considered, the process may be viewed as predetermined.

A Practical Example

A business decides to reduce headcount due to declining revenue.

During consultation, employees propose:

• temporary salary reductions

• reduced working hours

The employer rejects these options without analysis and proceeds with retrenchments.

Outcome:
Employees challenge the dismissal, arguing that viable alternatives were not properly considered.

The employer may struggle to justify why retrenchment was the only option.

Why Employers Lose on This Issue

Employers typically do not lose because retrenchment was unnecessary.

They lose because:

• alternatives were not properly explored

• consultation was superficial

• decisions were made too early

• the process was poorly documented

In retrenchment disputes, the focus is often on what the employer failed to consider, not just what it decided.

The Link to Consultation Risk

The failure to consider alternatives is closely tied to consultation failures.

If employees feel that:

• their input was ignored

• the outcome was predetermined

• alternatives were never seriously on the table

the entire process becomes vulnerable to challenge.

How Employers Can Reduce Risk

To manage this risk effectively:

• approach retrenchment as a last step, not the starting point

• engage meaningfully on alternatives during consultation

• assess alternatives realistically and document the reasoning

• respond properly to employee proposals

• ensure the process reflects an open mind

The key is not whether alternatives succeed, but whether they were genuinely considered.

Final Thoughts

Retrenchment is one of the most scrutinised dismissal processes in South African labour law.

Employers who move too quickly to termination often overlook one of the most important requirements: that dismissal must be a last resort.

Even where the business case is strong, failure to consider alternatives can unravel the process and expose the employer to unnecessary risk.

Need Advice on a Retrenchment Process?

Barter McKellar advises employers on section 189 consultations, restructuring strategies, retrenchments and Labour Court disputes.

If your business is considering retrenchments, early legal guidance can help ensure that alternatives are properly considered and that the process remains legally defensible.

Contact our team for practical, commercially focused labour law advice.