Fair on Paper, Fair in Practice - What South Africa’s Labour Law Changes Mean for Retrenchment

By Zelmari Kern, Founder and Managing Director, Kern Attorneys & Associates 

South Africa’s dismissal rules are changing. A new Code of Good Practice: Dismissal, published on 4 September 2025, replaced both the old Schedule 8 code and the separate code on dismissals for operational requirements. In February 2026, the Minister of Employment and Labour also published two amendment Bills for public comment, proposing changes to the Labour Relations Act, the Basic Conditions of Employment Act, the Employment Equity Act, the National Minimum Wage Act and the Unemployment Insurance Act. Public comment closed at the end of March 2026. As at September 2026, neither Bill had been introduced in Parliament, and the Department of Employment and Labour expects promulgation in 2028. Their provisions may change before enactment. Employers can prepare for the proposals, but they are not law until enacted and brought into force.

What is proposed 

Two proposals stand out for anyone planning a retrenchment. Minimum severance pay for dismissals based on operational requirements would increase from one week’s to two weeks’ remuneration per completed year of service, with the higher entitlement applying only to service after the amendment takes effect. Employees earning above a proposed annual threshold, initially set at R1.8 million and adjusted annually, would no longer be entitled to reinstatement or re-employment as a remedy for unfair dismissal, unless the dismissal is automatically unfair. The Bills also propose limits on the earnings taken into account when calculating compensation in certain unfair-dismissal and unfair-labour practice cases. The exception for automatically unfair dismissals covers more than discrimination or whistleblowing. Under section 187 of the Labour Relations Act, these dismissals also include, for example, dismissals for participating in a protected strike, exercising rights under the Act or because of pregnancy. A senior employee whose dismissal is automatically unfair could therefore still seek reinstatement, subject to the ordinary statutory requirements governing that remedy. 

Consultation is more than a notice 

Section 189 of the Labour Relations Act is not a formality, and the new Code spells out what meaningful consultation requires. It provides that the employer’s written notice initiating consultation should follow the format in Annexure A and must contain the relevant information available at that stage, including the reasons for the proposed retrenchment, alternatives considered, proposed selection criteria, severance pay and the possibility of future re-employment. The Act requires the parties to “engage in a meaningful joint consensus-seeking process”. In my view, consultation should start with the real reasons for the proposed retrenchment, not a sanitised version. Employees and their representatives need enough time to consider the information and respond. Their proposals, including alternatives the employer had not considered, deserve serious attention. The Act requires the employer to consider and respond to representations, give reasons for disagreeing and respond in writing where representations were made in writing. Consultation is seldom linear. Requests for information, counter-proposals and follow-up meetings are part of the process. An employer who has decided the outcome before the first meeting will struggle to defend the dismissal if it is challenged. 

The people on the receiving end 

In my experience, one salary in South Africa often supports an extended household, so losing a job brings grief and financial fear together. When a role has to go, that hardship cannot be avoided, but a cold letter or weeks of silence make it worse. An employee who believes that a retrenchment was substantively or procedurally unfair may challenge the dismissal through the statutory dispute-resolution process. Poor consultation can increase the likelihood of such a challenge, even where the employer believes it has followed the procedure. It can also cause misunderstanding within the business and damage the employer’s reputation. 

Where communication fits 

Communication supports a well-run retrenchment; it cannot rescue a badly run one. Once the substantive work has been done, HR and legal must ensure that the company’s objectives and the reasons for the process are communicated clearly and consistently: first to affected employees, then to the remaining team and, where necessary, to clients and the public. That communication must reflect what actually happened during consultation. Employees will know if a public statement describes a more careful process than the one they experienced. 

What employers can do now 

Employers need not wait for the Bills. Review section 189 notice templates against the Code’s Annexure A guidance and the statutory disclosure requirements. Brief those running consultations on what the Code expects. Factor the proposed severance increase into longer-term planning and allow enough time for consultation. How the consultation is run is what will be tested if a retrenchment is challenged, so that is where the effort should go.