Redundancy vs Retrenchment in South Africa

Redundancy vs Retrenchment in South Africa: What Employers Need to Know

Restructuring is a normal part of business — whether driven by cost pressures, new technology, or operational changes. But when roles shift or fall away, many employers confuse two important concepts: Redundancy and Retrenchment.

These terms may sound similar, but they have very different legal meanings under South African labour law. If they’re misunderstood or applied incorrectly, employers can face unfair dismissal claims, financial penalties, and reputational damage.

A recent Labour Court judgment, De Weijer v Babcock Africa Services (Pty) Ltd (2025), has added welcome clarity. The case explores when a position can be declared redundant and what a fair Section 189 process looks like in practice.

This article breaks down the ruling and shares practical guidance from an HR Consult perspective to help employers navigate restructuring with confidence.

Understanding the Case: De Weijer v Babcock Africa (2025)

During the COVID-19 period, Babcock Africa Services restructured and identified the Property Manager role as no longer required. The employee disagreed, arguing that many of his tasks were still being handled by other staff — therefore, his job “still existed”.

The Court found in favour of the employer.

Key Principle:
A position may be redundant even if some of the tasks continue elsewhere in the business.

The Court emphasised that the law distinguishes between a job and the tasks within it. A role can fall away due to operational changes, even if its duties are absorbed into other positions.

This distinction is crucial for employers planning restructures.

When Can a Role Be Considered Redundant?

Based on the Labour Court’s reasoning and the principles within the Labour Relations Act (LRA), a position is genuinely redundant when:

The role is no longer required due to operational changes (e.g., restructuring, automation, downsizing).
The core functions can be redistributed without recreating the same role in another form.
The business follows a fair Section 189 process, including consultation and consideration of alternatives.

Redundancy is about the job, not the employee — and not about whether tasks still exist.

Following a Fair Section 189 Retrenchment Process

In the Babcock matter, the employer’s process was highlighted as an example of compliance done well. They:

Consulted extensively over several months
Shared relevant operational and financial information
Explored alternatives such as transfers and “bumping”
Applied criteria consistently
Treated all affected employees fairly

The Court confirmed that procedural fairness is just as important as the operational rationale.

Tip: A retrenchment is judged on the quality of the process — not the label you attach to it.

Severance Pay: A Common (and Costly) Mistake

Even when employers follow Section 189 correctly, errors often arise when calculating severance pay.

In this case, the employer calculated severance using only the basic salary, excluding several BCEA-defined remuneration items such as:

Housing allowance
Car allowance
Medical aid contributions
Pension or provident fund contributions

As a result, the employer was ordered to pay an additional R77,370.57.

Important:
Severance pay must be based on total remuneration as defined in the BCEA — not only basic salary.

Implications for HR Practice

Term	Meaning	Legal Reference
Redundancy	A position is no longer required due to operational changes.	LRA, Section 189
Retrenchment	The dismissal of an employee because their position is redundant.	LRA & BCEA

In simple terms:

Redundancy = the reason
Retrenchment = the action

Common Employer Mistakes During Restructuring

To minimise risk, avoid these frequent errors:

Inadequate consultation or treating consultation as a mere formality
Incorrectly concluding redundancy without proper operational rationale
Using basic salary only for severance calculations
Inconsistent application of selection criteria
Poor documentation — missing records, weak minutes, or incomplete rationale

Proper planning and documentation protect the business from unfair dismissal claims.

FAQs for Employers

Is redundancy the same as retrenchment?
No. Redundancy relates to the role; retrenchment relates to the employee being dismissed as a result.
Can an employee be retrenched if their tasks still exist?
Yes — provided the position no longer exists and the employer follows a fair Section 189 process.
How must severance pay be calculated?
Using total BCEA remuneration, including allowances and employer contributions.
Do employers need to consult even if restructuring is unavoidable?
Absolutely. Consultation is mandatory and must be meaningful.
Can duties be redistributed after a retrenchment?
Yes — as long as the role itself is no longer required and the process was fair.

Key Takeaways for South African Employers

A role may be redundant even if tasks are reassigned.
A fair, transparent Section 189 process is essential.
Severance pay must include all BCEA-remuneration components.
Good documentation and consistent treatment reduce legal risk.

How HR Consult Supports Businesses During Restructuring

Restructuring can be complex and sensitive — but with the right guidance, it doesn’t need to be overwhelming.

HR Consult assists businesses with:

Full Section 189 process guidance and facilitation
Accurate severance pay calculations
Documentation and record-keeping
Risk management and dispute prevention
Practical support for HR teams and managers

A fair process not only protects your business legally — it supports dignity, trust, and transparency in the workplace.

Not sure if your restructuring process meets legal requirements?

📌 HR Consult can help. Contact us for reliable labour law support and practical HR solutions.

Office: 012 997 0037

E-mail: info@hrconsultsa.co.za

Adapted by HR Consult, specialists in South African labour and employment law compliance.

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