Employment termination in South Africa is governed primarily by the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA). These laws establish strict requirements for employers regarding the reasons for dismissal and the procedures that must be followed to ensure fairness and legality. Navigating these regulations is crucial for employers to avoid costly disputes and potential claims of unfair dismissal.
Understanding the specific requirements for notice periods, severance pay, valid grounds for termination, and the necessary procedural steps is essential for any employer operating in South Africa. Compliance ensures that terminations are handled lawfully and ethically, protecting both the employer and the employee's rights.
Notice Period Requirements
The Basic Conditions of Employment Act (BCEA) specifies minimum notice periods that an employer must give an employee to terminate employment. These minimums depend on the length of the employee's service with the employer. Collective agreements or individual employment contracts may stipulate longer notice periods, but they cannot be shorter than the BCEA minimums.
Here are the minimum notice periods as per the BCEA:
| Duration of Employment | Minimum Notice Period |
|---|---|
| Less than 6 months | 1 week |
| 6 months to 1 year | 2 weeks |
| More than 1 year | 4 weeks |
| Farm workers or domestic workers employed for more than 6 months | 4 weeks |
Notice must be given in writing, except when given by an illiterate employee. The notice period begins on the day after the notice is given and ends on the last day of the notice period. An employer may pay an employee in lieu of notice, meaning the employee receives their full pay for the notice period but does not have to work it.
Severance Pay
Severance pay is a payment made to an employee whose employment is terminated due to the employer's operational requirements (often referred to as retrenchment). It is not applicable in cases of termination for misconduct or incapacity. The entitlement to severance pay arises when an employee is dismissed for reasons based on the economic, technological, structural, or similar needs of the employer.
The minimum severance pay entitlement is one week's remuneration for each completed year of continuous service with the employer. Remuneration for this purpose includes the employee's regular wage or salary and any other payments in money or in kind that form part of the employee's basic pay.
Calculation of severance pay:
- Determine the employee's weekly remuneration.
- Count the number of completed years of continuous service.
- Multiply the weekly remuneration by the number of completed years of service.
Example: An employee earning R2,000 per week with 5 completed years of service would be entitled to a minimum severance pay of R2,000 * 5 = R10,000.
In addition to severance pay, employees dismissed for operational requirements are also entitled to payment for any accrued but untaken annual leave and any pro-rata portion of their annual bonus or other contractual benefits up to the date of termination.
Grounds for Termination
South African law recognizes three main fair grounds for terminating an employee's employment:
- Misconduct: This relates to the employee's behaviour, such as theft, insubordination, absenteeism, or breach of company rules. The misconduct must be serious enough to warrant dismissal, and the employer must prove that the employee committed the misconduct and that dismissal is an appropriate sanction.
- Incapacity: This relates to the employee's ability to perform their job. It can be due to:
- Poor Performance: The employee fails to meet the required performance standards despite being given training, guidance, and a reasonable opportunity to improve.
- Ill Health or Injury: The employee is unable to perform their job due to illness or injury, and no reasonable accommodation can be made to enable them to perform their duties or alternative suitable work is not available.
- Operational Requirements: This relates to the economic, technological, structural, or similar needs of the employer. This ground is typically used for retrenchments where positions become redundant due to business reasons.
Termination without a valid reason falling under one of these categories is considered substantively unfair.
Procedural Requirements for Lawful Termination
For a dismissal to be fair, not only must there be a valid reason (substantive fairness), but the employer must also follow a fair procedure. The specific procedure varies depending on the ground for dismissal.
Procedure for Misconduct:
- Investigation: Conduct a reasonable investigation to establish the facts of the alleged misconduct.
- Notification: Inform the employee in writing of the allegations against them, providing sufficient detail to enable them to understand the charge and prepare a response. The notice should also inform the employee of their right to a hearing, to be represented at the hearing, and to call witnesses.
- Disciplinary Hearing: Hold a fair hearing where the employee has the opportunity to respond to the allegations, present evidence, and challenge evidence against them.
- Decision: After the hearing, the employer must make a decision based on the evidence presented. If the employee is found guilty, the employer must consider appropriate sanctions, including whether dismissal is warranted given the severity of the misconduct and the employee's circumstances.
- Notification of Decision: Inform the employee of the decision in writing, stating the reasons for the decision and their right to refer a dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) or a relevant bargaining council.
Procedure for Incapacity (Poor Performance):
- Counseling: Counsel the employee regarding the performance issue, identifying the areas needing improvement and setting clear performance standards and timelines.
- Evaluation and Support: Provide the employee with necessary training, guidance, and resources to improve. Monitor their performance over a reasonable period.
- Further Counseling/Hearing: If performance does not improve, hold further discussions or a formal hearing to discuss the continued poor performance and consider alternatives to dismissal.
- Decision: If performance remains unsatisfactory despite support and opportunity, consider dismissal as a last resort, ensuring the procedure followed was fair.
Procedure for Incapacity (Ill Health/Injury):
- Investigation: Investigate the extent of the ill health or injury and its impact on the employee's ability to perform their job. Obtain medical information (with the employee's consent).
- Consultation: Consult with the employee and potentially their medical advisors to understand the prognosis and likelihood of recovery.
- Consider Alternatives: Explore reasonable alternatives to dismissal, such as adapting the employee's duties, providing alternative work, or adjusting the workplace.
- Hearing/Meeting: Hold a meeting or hearing with the employee to discuss the situation, the alternatives considered, and the potential outcome.
- Decision: If no reasonable accommodation or alternative work is possible, dismissal may be considered, ensuring a fair process was followed.
Procedure for Operational Requirements (Retrenchment):
- Consultation Process: Engage in a meaningful joint consensus-seeking process with affected employees or their representatives (trade unions, workplace forum).
- Disclosure of Information: Disclose relevant information in writing, including the reasons for the proposed retrenchment, the alternatives considered, the number of employees likely to be affected, the selection criteria, the timing, and the severance pay proposed.
- Opportunity to Make Representations: Allow employees or their representatives to make representations on the information disclosed and the proposals made.
- Consider Representations: Seriously consider the representations made and respond to them.
- Selection Criteria: Apply fair and objective selection criteria if not all employees in a particular category are to be retrenched (e.g., LIFO - Last-In, First-Out, skills, experience).
- Final Decision and Notice: Issue a written notice of termination to the selected employees, stating the reason for dismissal (operational requirements), the effective date, and details of final payments, including severance pay.
Common procedural pitfalls include failing to hold a hearing, not giving sufficient notice of a hearing, not allowing representation, not properly investigating allegations, or failing to engage in a proper consultation process for retrenchments.
Protection Against Wrongful Dismissal
Employees in South Africa are protected against unfair dismissal. An employee who believes they have been unfairly dismissed can refer a dispute to the CCMA or a relevant bargaining council within 30 days of the date of dismissal.
A dismissal can be found to be unfair for two main reasons:
- Substantive Unfairness: There was no valid reason for the dismissal (e.g., no misconduct occurred, performance was adequate, or the retrenchment was not genuinely based on operational needs).
- Procedural Unfairness: A valid reason existed, but the employer failed to follow a fair procedure before dismissing the employee.
If the CCMA or bargaining council finds a dismissal to be unfair, they can order various remedies, including:
- Reinstatement: The employee is returned to their job as if they were never dismissed.
- Re-employment: The employee is employed in a similar position.
- Compensation: The employer is ordered to pay the employee compensation, which can be up to 12 months' remuneration for ordinary unfair dismissal, or up to 24 months' remuneration in cases of automatically unfair dismissal (e.g., dismissal due to union membership, pregnancy, or discrimination).
Understanding and adhering to the legal requirements for termination is vital for employers in South Africa. Proper procedure and valid grounds are the cornerstones of fair and lawful dismissal, significantly reducing the risk of costly and time-consuming disputes.
