Redundancy Scheme

When a company undergoes a significant reorganisation, a redundancy scheme needs to be drawn up. After all, collective dismissal has far-reaching consequences for the employees involved. The redundancy scheme describes how the company will treat the employees who have to be made redundant.

The final text of the redundancy scheme is generally the product of discussions with the unions. The unions usually get involved after notification of the planned collective dismissal has been given, as required by law. This sometimes results in the redundancy scheme being categorised as a collective labour agreement.

Issues that are generally provided for in the redundancy scheme include:

  • the engagement of an outplacement agency,
  • arrangements for leave to attend interviews,
  • continuation of or release from duties up to the date when employment terminates,
  • the conditions that have to be satisfied for severance pay to be awarded,
  • the method for calculation of the severance pay amount,
  • the manner in which the employment relationship will be terminated,
  • the period in which the employment relationship will be terminated,
  • how any non-competition clause will be dealt with.

An employee may apply to have the reasonableness of the redundancy scheme reviewed by the sub-district court. Such a review is generally only worthwhile if the employee has a lengthy service period and has reached an age at which it will be more difficult to find other employment. It goes without saying that the employer must have sufficient capital to finance a severance payment.

A review can be required by issuing proceedings against the employer after notice has been given to terminate the employment relationship. The summons must state that the consequences of the termination for the employee are too severe as compared to the interest of the employer served by the termination, “taking into consideration the provision made for the employee and the opportunities available to him for finding other suitable work”.

Conducting such proceedings has potential benefits but is also attended by the risks associated with court proceedings. Read the chapter under the heading “Going to court”. Take advice about your prospects and the risks involved before issuing proceedings. Contact a lawyer experienced in this field before you take action. Call us or use our contact form “Ask a question for free”.

Information needed

To help us answer your question, please provide the following information and documents if possible: 

  • your employment contract and any supplementary agreements,
  • any collective labour agreement that may apply,
  • the redundancy scheme,
  • the most recent annual accounts published at the Chamber of Commerce,
  • the employer’s application for the grant of a dismissal permit,
  • all annexures submitted with the application for the dismissal permit,
  • the dismissal permit granted,
  • the employer’s official letter terminating the employment relationship,
  • your penultimate pay slip (as this relates to a full salary period),
  • your last pay slip (including the settlement of outstanding balances),
  • all correspondence between the parties,
  • the date you commenced employment with your employer,
  • your date of birth.


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