South African employers who are contemplating a restructure now face a materially different fairness benchmark. On 4 September 2025, the Minister of Employment and Labour issued the new Code of Good Practice on Dismissal, published in Government Gazette No. 53294 as General Notice 3470 of 2025. That instrument repealed the 1999 Code of Good Practice on Dismissal Based on Operational Requirements and folded operational requirements dismissal into a single, consolidated 2025 Code of Good Practice on Dismissal covering misconduct, incapacity and operational requirements together.
The underlying statute has not changed. Section 189 of the LRA and section 189A of the LRA remain the primary provisions regulating dismissals based on operational requirements. What has changed is the yardstick against which the CCMA, bargaining councils and the Labour Court will now measure your process. Any retrenchment under the 2025 Code is tested against the new instrument, including its standardised section 189(3) notice template in Annexure A.
This article explains what employers must do differently, what remains the same, and where retrenchments most often come apart in practice.
What Changed on 4 September 2025 (and What Did Not)
The 2025 Code of Good Practice on Dismissal is not legislation. It is a Code issued under the LRA and it carries persuasive authority. That means the CCMA and the Labour Court apply it as the benchmark for fairness when they assess whether an operational requirements dismissal was procedurally and substantively fair.
What did not change:
- The LRA still governs. Sections 189 and 189A of the LRA continue to set the substantive and procedural obligations for operational requirements dismissal.
- Section 41 of the Basic Conditions of Employment Act still prescribes the statutory severance minimum.
- The twin-fairness test still applies. A retrenchment must be substantively fair (a genuine operational reason) and procedurally fair (a proper consultation).
What did change:
- The 1999 Code on Operational Requirements has been repealed. Employer checklists, templates and internal policies built off the old Code should not be relied on as-is.
- Operational requirements guidance has been consolidated into the single 2025 Code alongside misconduct and incapacity.
- The Code introduces a standardised section 189(3) notice template in Annexure A.
- The Code sharpens the emphasis on early planning, genuine consultation, transparent disclosure and proper record-keeping. It treats the quality of the consultation, not merely the paperwork, as the touchstone for fairness.
- The Code acknowledges the practical realities of small employers. It does not, however, exempt small employers from the consultation, fair-selection and severance obligations of section 189.
Employers who are still consulting off a 1999-era checklist are exposed. A section 189 process launched now is measured against the new Code.
Retrenchment Under the 2025 Code: Section 189 or Section 189A
Deciding whether your restructure falls under section 189 or section 189A of the LRA is the first substantive question. Getting it wrong at the outset drives most of the procedural disputes that follow.
Section 189 applies to ordinary operational requirements dismissal where the section 189A thresholds are not triggered. It sets the core obligations: consult in good faith with the affected parties, disclose relevant information in writing, engage in joint consensus-seeking on the topics prescribed in section 189(2), and issue termination notices only after consultation has been meaningfully exhausted.
Section 189A large-scale retrenchment applies to employers that employ more than 50 employees and are contemplating retrenchments that meet the numerical thresholds in that section. Section 189A introduces a different procedural architecture: prescribed time periods, the availability or requirement of CCMA facilitation, restrictions on strike and lock-out rights, and a procedural challenge route under section 189A(13) that allows employees to attack procedural unfairness before dismissal takes effect.
Two practical points follow.
First, do not assume facilitation is optional if section 189A thresholds are triggered. It may be initiated at the request of the employer or the consulting parties, and in some circumstances it is unavoidable in substance if the process is to survive scrutiny.
Second, section 189A large-scale retrenchment matters typically take longer, cost more and carry higher litigation risk. The window for correcting procedural defects narrows quickly once notices have gone out, and an urgent Labour Court application under section 189A(13) is not a remote risk. It is a real, and increasingly used, remedy.
Running a Fair Consultation: Notice, Disclosure and Joint Consensus-Seeking
A fair retrenchment procedure begins the moment retrenchment is contemplated. It does not begin when the decision has already been taken and the section 189(3) notice template is used to communicate it. That distinction is where many employers go wrong.
The employer must:
- Issue a section 189(3) notice inviting the affected parties to consult.
- Identify the consulting parties correctly, in the order set out in section 189(1) (workplace forum, registered trade union party to a collective agreement, registered trade union whose members are likely to be affected, or the employees themselves).
- Disclose in writing all relevant information that will allow the consulting parties to engage effectively. This includes the reasons for the proposed retrenchment, alternatives considered and rejected, the number and categories of employees likely to be affected, the proposed selection criteria, the proposed timing, severance proposals, assistance the employer proposes to offer, and the possibility of future re-employment.
- Engage in a genuine joint consensus-seeking process on the topics in section 189(2): measures to avoid the dismissals, measures to minimise the number of dismissals, measures to change the timing of the dismissals, measures to mitigate the adverse effects of the dismissals, the method for selecting employees, and severance pay.
- Answer reasonable requests for further information. Refusing to disclose information the consulting parties need to engage meaningfully is a well-worn route to a finding of procedural unfairness.
Only once the consultation has been meaningfully exhausted may the employer issue notices of termination. “Meaningfully exhausted” is a substantive test, not a diary entry. A single meeting followed by termination notices is unlikely to survive scrutiny under the 2025 Code.
Selection Criteria and the Annexure A Section 189(3) Notice Template
The Annexure A section 189(3) notice template standardises the format of the initiating notice and incorporates the information section 189(3) requires. Used properly, it reduces the risk that an employer overlooks a required disclosure category. Used unthinkingly, it creates the false comfort that the paperwork is the process.
Completing the template does not, on its own, guarantee procedural fairness. Employers must still:
- Attach or make available the supporting information the template references.
- Respond to reasonable requests for further disclosure.
- Genuinely consider alternatives raised by the consulting parties during consultation.
- Keep contemporaneous minutes and records of what was discussed, what was offered, what was accepted or rejected, and why.
On selection, the 2025 Code reinforces the long-standing requirement that criteria must be fair and objective. Last-in-first-out (LIFO) remains the generally accepted starting point, particularly where employees perform interchangeable work. Skills-based, qualifications-based or performance-based criteria (or a hybrid) may be defensible where they are operationally justified and objectively applied. Whatever criteria are used should be discussed during consultation, agreed where possible, consistently applied across the affected pool, and supported by evidence that can withstand challenge.
Subjective or opaque selection criteria are one of the most common reasons a retrenchment award goes against an employer. If the criteria cannot be explained on paper and defended in evidence, they are the wrong criteria.
Severance Pay Under Section 41 of the BCEA
Section 41 of the Basic Conditions of Employment Act prescribes a minimum severance payment of one week’s remuneration for every completed year of continuous service with the employer. This is a floor, not a ceiling.
Two practical points arise in almost every consultation:
- Employers are free to offer enhanced severance packages, and often should. Enhanced packages can reduce dispute risk, encourage voluntary exits, and produce a cleaner outcome than a contested process. A better package is not a legal admission of anything.
- Employees who unreasonably refuse an offer of reasonable alternative employment may forfeit their entitlement to statutory severance pay. Whether a refusal was unreasonable is a fact-sensitive enquiry. The employer bears the burden of demonstrating both that the alternative was reasonable and that the refusal was not.
Voluntary severance and mutual separation agreements are useful tools but they are not automatically enforceable. They must be properly agreed, reduced to writing in terms the employee understood, and free of duress or misrepresentation. Employers who present a voluntary severance offer as a fait accompli after the section 189(3) notice has gone out are exposed to later challenge.
Severance under section 41 is a minimum. It is not always the complete commercial answer.
Where Employers Get Retrenchment Wrong
The recurring pattern of employer failure is not usually a substantive one. Businesses generally have operational reasons for restructuring. The failures are procedural, and they are almost always visible on the record.
The mistakes that most commonly land at the CCMA or the Labour Court include:
- Deciding to retrench before consultation begins, and treating the section 189(3) notice as a communication of the decision rather than an invitation to consult.
- Inadequate disclosure of financial or organisational information.
- Consulting too late, too briefly, or as a formality.
- Failing to genuinely consider alternatives raised during consultation.
- Applying subjective selection criteria that cannot be defended on evidence.
- Poor record-keeping, so the paper trail cannot demonstrate what the process actually looked like.
- Restructures that produce no genuine operational change, or that are followed by the hiring of replacement employees shortly afterwards.
- Using a retrenchment to remove a difficult or underperforming employee who should have been managed under a misconduct or incapacity process.
The last category is particularly dangerous. Retrenchment is a no-fault dismissal. It is not a substitute for a proper poor-performance process. Employers who conflate the two often trade one procedural risk for a larger one, and where the underlying reason is linked to pregnancy, trade union activity, victimisation, whistleblowing or a prohibited ground of discrimination, the dismissal may be automatically unfair under the LRA. The consequences of that finding are far more serious than an unfair dismissal award.
A fair retrenchment procedure is one that could be reconstructed, in full, from the employer’s own documents. If the record does not tell a coherent, defensible story, the process is exposed.
For a wider view of the fairness framework the CCMA and Labour Court apply, our guide on the framework for unfair dismissal in South African labour law sets out the three grounds of dismissal and the twin-fairness test in more detail. Where the underlying question is really about conduct or capacity rather than operational requirements, our note on the distinction between misconduct and poor performance dismissals explains which process should actually be followed.
When to Get Attorneys Involved
The right time to instruct a labour attorney is before the section 189(3) notice is issued. That is when the operational rationale, the consulting-party analysis, the selection criteria, the disclosure pack and the consultation strategy can be pressure-tested and corrected. Once the notice has been issued, corrections become harder and more visible.
Waiting until consultation has broken down, or until an urgent application under section 189A(13) has been threatened, limits what can be done. Procedural defects that could have been avoided can rarely be cured after the fact.
Vermeulen Attorneys’ Labour Law team advises employers on operational requirements dismissal from the point of contemplation through to Labour Court litigation where necessary. A short review of the draft section 189(3) notice, the selection matrix, and the intended consultation plan is often the highest-value legal spend in the entire process. For readers who have already been referred to the CCMA on a related dispute, our practical guide on procedural and substantive fairness at CCMA level may be useful background. Where an employer is tempted to use a probation dismissal as a shortcut, our note on probationary employee dismissal in South Africa explains why that route rarely holds.
Book an Employer Retrenchment Advisory Consultation with Vermeulen Attorneys’ Labour Law team before you issue the section 189(3) notice. Contact Vermeulen Attorneys to arrange a consultation. A short review at the front end is materially cheaper than defending a badly-run process at the back end.
Frequently Asked Questions
Is section 189 of the LRA still the law for retrenchment under the 2025 Code?
Yes. Sections 189 and 189A of the LRA remain the primary statutory provisions governing operational requirements dismissal. The 2025 Code of Good Practice on Dismissal did not replace the LRA. It replaced the 1999 Code on Operational Requirements and sets the fairness benchmark against which section 189 processes are now tested.
What is the difference between section 189 and section 189A large-scale retrenchment?
Section 189 applies to ordinary retrenchments where the section 189A thresholds are not met. Section 189A large-scale retrenchment applies to employers with more than 50 employees where the number of proposed retrenchments meets the statutory thresholds. Section 189A introduces prescribed time periods, the availability or requirement of CCMA facilitation, restrictions on strike and lock-out rights, and the procedural challenge route in section 189A(13).
What must a section 189(3) notice contain under the 2025 Code?
The section 189(3) notice must contain the information listed in section 189(3), now standardised in the Annexure A section 189(3) notice template. That includes the reasons for the proposed retrenchment, alternatives considered, the number and categories of employees likely to be affected, the proposed selection criteria, the proposed timing, severance proposals, assistance the employer will offer, and the possibility of future re-employment. Completing the template does not, on its own, ensure fairness. The employer must still disclose supporting information and consult meaningfully.
How much severance must a South African employer pay?
Section 41 of the Basic Conditions of Employment Act prescribes a minimum of one week’s remuneration for every completed year of continuous service. An employer may pay more. An employee who unreasonably refuses an offer of reasonable alternative employment may forfeit that entitlement, depending on the facts.
Does the 2025 Code exempt small businesses from section 189?
No. The 2025 Code acknowledges the practical realities of small employers, but it does not exempt them from the consultation, fair-selection and severance obligations in section 189 of the LRA. A small employer must still consult meaningfully, apply fair and objective selection criteria, and pay the statutory severance.
When does a retrenchment become automatically unfair?
A retrenchment may be automatically unfair where the real reason for the dismissal is linked to a protected ground, including pregnancy, trade union membership or activity, participation in a protected strike, whistleblowing under the Protected Disclosures Act, or a listed ground of discrimination. The remedies for automatically unfair dismissal are significantly more serious than for ordinary unfair dismissal.
When can employees challenge a retrenchment before dismissal takes effect?
In section 189A large-scale retrenchment matters, employees or their representatives may bring an urgent application to the Labour Court under section 189A(13) to compel compliance with a fair retrenchment procedure before the dismissals take effect. This is not a rare remedy. It is used, and it can halt a defective process mid-flight.
