What a Retrenchment Letter Actually Is
A retrenchment letter in South Africa is a section 189(3) notice: a written invitation to consult about proposed job cuts. It does not end anyone's employment. It opens a conversation the law requires you to have first.
That distinction is where most employers lose. They write a letter that reads like a decision already taken, hand it over, and pay people out a month later. At the CCMA that sequence has one name: dismissal without consultation.
Retrenchment is a no-fault dismissal. Nobody did anything wrong - the role is what becomes redundant, because of the employer's operational requirements. Because no misconduct is alleged, the entire fairness test rests on process. Get the process right and a retrenchment is lawful even when it is painful.
The one-line test
Read your draft letter and ask: could an employee still change my mind after reading this? If the answer is no, it is not a section 189(3) notice - it is a termination letter wearing the wrong title, and it will be found procedurally unfair.
Download the Free Retrenchment Letter
An editable Microsoft Word document and a print-ready PDF. The structure follows Annexure A to the 2025 Code, so all 11 pieces of information section 189(3) requires appear in the order a commissioner expects to find them. Enter your details and both files arrive in your inbox.
Need to issue one right now?
Copy the full notice, paste it into Word or Google Docs, and fill in the bracketed fields. All 11 sections are already in the right order.
What the Letter Must Cover, Section by Section
Section 189(3) requires a written notice that invites consultation and discloses specific information - items (a) to (j) of the section. Annexure A to the 2025 Code standardised how it is set out. The template lays all of it out across 11 sections, adding the payments that fall due and the section 189A check, so nothing is left for the other side to argue about.
The commercial, economic, technological or structural reason for the proposed cuts. "Cost-cutting" alone is routinely rejected. State what changed, when, and what it did to the business.
What else you considered - short time, a hiring freeze, voluntary packages - and why each was rejected. Retrenchment must be a last resort, and this is where you prove it was.
Job categories, how many people in each, your total headcount, and how many you retrenched in the previous 12 months.
How you will choose. Length of service (LIFO) and retention of critical skills or qualifications are expressly recognised as generally fair and objective.
When consultation starts and when retrenchments would take effect if agreed. No dismissal may take effect before consultation has properly run its course.
What you propose to pay. The BCEA floor is one week per completed year of service - say so, and say if you intend to better it.
Notice pay, accrued annual leave paid out, any pro-rata bonus, and outstanding remuneration to the termination date.
Time off for interviews, a written reference, help completing the UI-19 form for the UIF claim. Small commitments, real weight at arbitration.
Whether retrenched staff get preference if you hire again, and for how long. The 2025 Code recognises preferential re-employment as fair practice.
The meeting date, where to send written representations, the deadline, and the right to be represented by a union rep or fellow employee.
Whether the large-scale retrenchment regime applies to you. Getting this wrong changes every deadline that follows.
What You Actually Have to Pay
Four separate amounts fall due when a retrenchment completes. Employers routinely budget for one and get surprised by the other three.
Severance pay
Minimum one week's remuneration for each completed year of continuous service, under section 41 of the BCEA. On R25,000 a month that is about R5,769 per year of service. Employees with under one completed year get nothing here.
Notice pay
Section 37 of the BCEA: one week if employed six months or less, two weeks if between six months and a year, four weeks if a year or more. These are minimums and cannot be shortened by agreement.
Accrued annual leave
Every day of untaken annual leave is paid out in full. This is not discretionary and not negotiable.
Pro-rata amounts
Any bonus or 13th cheque earned to date, plus outstanding remuneration up to the termination date.
The exception worth knowing
An employee who unreasonably refuses a suitable offer of alternative employment - with you or with another employer you arrange - forfeits severance pay entirely. The word doing the work is "unreasonably". A genuine offer at comparable terms that is turned down flat is very different from a demotion dressed up as an alternative.
Work out the full number before you issue the letter, not after. Our free retrenchment calculator gives you severance, notice pay and leave payout in one view.
Do You Need to Wait 60 Days?
Only if section 189A applies. It catches employers with more than 50 employees where the number of proposed dismissals also meets a statutory threshold - starting at 10 dismissals for employers of up to 200 people, and rising to 50 dismissals for employers of more than 500, measured over a 12-month period.
Where it applies, either side may ask the CCMA to appoint a facilitator using Form 7.20. The facilitator convenes a minimum of four meetings, and notice of termination may generally only be given once 60 days have passed since the section 189(3) notice was issued. Where no facilitator is appointed, a 30-day period applies before either party may act.
If you employ fewer than 50 people
Section 189A does not apply and no fixed waiting period is imposed. That is not permission to move fast. Consultation still has to be genuine and complete, and the 2025 Code allows smaller employers to use simpler, less formal procedures only if the process remains fair.
5 Mistakes That Cost Employers at the CCMA
Announcing instead of consulting
A letter that says "your position has been made redundant" has skipped the entire process. Section 189 requires a joint problem-solving exercise in which employees can genuinely influence the outcome. The letter must propose, not pronounce.
Vague reasons
Writing "operational requirements" and stopping there tells an employee nothing they can respond to. Commissioners expect the actual commercial facts - what changed, when, and the effect on the business. Attach the figures where you can.
Selection criteria invented after the fact
Criteria must be disclosed in the notice, before anyone is selected. Choosing people first and reverse-engineering the criteria afterwards is visible from the outside and fatal to fairness.
Skipping the alternatives section
Retrenchment is a last resort as a matter of law. If you cannot show what else you considered and why it failed, you cannot show it was a last resort. This is the single most commonly omitted section.
Treating a signature as agreement
An employee signing the notice is acknowledging receipt, nothing more. Employers who later argue the employee "agreed" because they signed generally lose, and the argument itself damages credibility on everything else.
The Retrenchment Sequence
This letter is step two. Here is the full sequence, with links to the rest of Synthro's free tools and templates.
Work out the cost
Free tool →Severance, notice and leave payout before you commit.
Section 189(3) notice
This template. Opens consultation.
Consult properly
Free tool →Meet, minute every session, respond in writing to proposals.
Select and confirm
Apply the disclosed criteria. Confirm outcomes in writing.
Termination letter and UI-19
Free tool →Only now. Issue the UI-19 so the UIF claim can be lodged.
Handle It in 60 Seconds With NALA
A retrenchment is won or lost on the paper trail. When it is tested, the question is not whether you meant well - it is whether you can produce the notice, the minutes of every consultation, the selection matrix you actually applied, and your written response to each proposal the employees made.
NALA knows the 2025 Code of Good Practice: Dismissal and walks you through the sequence in order. Synthro keeps every document on the employee record with its date, so twelve months later the full history is still there and still coherent.
Frequently Asked Questions
Is a retrenchment letter the same as a termination letter?
No, and confusing the two is the most expensive mistake employers make. A section 189(3) retrenchment letter is an invitation to consult - it opens a conversation and ends nobody's employment. A termination letter comes later, only after consultation has genuinely run its course. If your first letter reads like a termination, you have skipped consultation entirely and the dismissal is procedurally unfair.
How much severance pay must I pay when retrenching in South Africa?
Section 41 of the BCEA sets the minimum at one week's remuneration for each completed year of continuous service. On a R25,000 monthly salary that is roughly R5,769 per completed year (R25,000 x 12 / 52). This is a floor, not a ceiling - a contract or collective agreement may require more. An employee who unreasonably refuses a suitable offer of alternative employment forfeits severance pay.
How long does a retrenchment take in South Africa?
For a small employer, consultation must simply be genuine and complete - there is no fixed minimum. Where section 189A applies (more than 50 employees, plus the dismissal threshold), notice of termination may generally only be given once 60 days have passed since the section 189(3) notice was issued. Where no facilitator is appointed, a 30-day period applies before either party may act.
Can I retrench someone who has been with me less than a year?
Yes, but they are not entitled to statutory severance pay, which requires at least one completed year of continuous service. They are still entitled to notice pay under section 37 of the BCEA, payment of accrued annual leave, and the full consultation process. Skipping consultation because someone is new is a straightforward route to an unfair dismissal finding.
This template and guide reflect the Labour Relations Act, the Basic Conditions of Employment Act and the 2025 Code of Good Practice: Dismissal as at July 2026. It is general information, not legal advice. Confirm the current position - and take advice on a large or contested retrenchment.
