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Voluntary retrenchment vs full and final settlement

Voluntary retrenchment vs full and final settlement

A company may embark on retrenchment proceedings when faced with an operational issue in which staff needs to be reduced in order to ensure that the business stays open. An employer has two options in this regard, forced and/or compulsory retrenchment or to offer voluntary retrenchments packages to the staff.

Voluntary retrenchment

When embarking on a process of retrenchment the employer may offer a voluntary retrenchment package to the staff members. Before an employee take and/or accept the voluntary retrenchment package they must have been served with and/or made aware of the disclosure of information document in order for them to make an informed decision.

In so doing the long protracted retrenchment process is avoided which is created by forced and/or mandatory retrenchments. The employment relationship can terminate on the date that the voluntary retrenchment is accepted by both parties which must always be in writing. The parties may also agree that the last date of employment may be on a future date.

In the case of Nthite v Reitzer Pharmaceuticals (Pty) Ltd (JS450/13) (2014) ZALCJHB326 the court stated the following.

There are essentially three consequences that flow from a voluntary retrenchment agreement namely:

  1. The employee’s employment contract is terminated by agreement;
  2. compulsory or forced retrenchment is avoided;
  3. the employee waives any right he or she may have concerning the fairness or otherwise of the termination.

Although it has been accepted that the Court shall give due regard to and uphold voluntary retrenchment agreements, it has also been accepted that these agreements are not immune from interrogation by the Court to determine their enforceability.

Full and final settlement

A full and final settlement is a mutual termination of employment by the employer and employee.

In terms of a full and final settlement there is no need for any retrenchment process to be imminent. The full and final settlement is an agreement between two parties the employer and employee to cancel the employment relationship which existed between them. After signing the agreement the parties go their separate ways. The document must state that it is in full and final settlement and no party has any other recourse, be it to refer a matter to the CCMA and or to the Courts. These agreements may however still be referred to the CCMA and or Labour Court by employees. One of the grounds under which an employee may refer a matter to the CCMA based on a full and final settlement is when they claim that they signed the agreement under duress. The employer may approach an employee with an offer in full and final settlement in that the employment relationship terminates on the date of acceptance which must be in writing for evidentiary purposes. The employee must in this instance also be made aware of the full consequences and effect of entering into such a full and final settlement. There is no amount of money prescribed by law to be adduced as a settlement and it can literally be any amount that the parties agree on. Bear in mind that the employer is still liable for the statutory monies due to an employee and thus the full and final settlement amount is in addition to that.

Luckily, you will never have to worry about retrenchment procedures as our highly professional SEESA Labour Legal Advisors can help you through this difficult time – do not hesitate to contact us today!

ABOUT THE AUTHOR

Rezonia Davids obtained her LLB degree from the University of the Western Cape in 2007. She then worked at Pretorius Rosant Attorneys while completing her LLB degree. She completed the School for Legal Practice programme at The University of Cape Town. Rezonia worked at Legal Aid South Africa as an Article Clerk and was thereafter admitted as an Attorney in the High Court of South Africa after which she joined SEESA Labour in 2010.

2 Comments

  1. Alecia 2 years ago

    In April this year my job title was changed from Assistant Branch Manager to Admin Manager without any prior notice I was just told by my manager that my position has changed and I need to sign the new letter of employment and send back to HR or I will not have a job anymore. Then again ending July I was told by my manager that my position has become redundant in our branch and I must either take the supervisor position or I can take retrenchment. My problem is that I was an assistant branch manager and then they changed my title to Admin Manager but my duties still remained the same and now they want to demote me to Front an Back office supervisor, which takes my career backwards. How do o put this on my CV? This does not just affect my CV but also my professional career. What does this look like in the eyes of another employer when I am seeking other jobs?

    • Author
      Tersia Landsberg 2 years ago

      Good morning Alecia

      Kindly send me an email to tersia@seesa.co.za with your enquiry. Please note, however, that SEESA protects and assists the business owner in all industrial relations.

      Warm regards
      Tersia Landsberg
      SEESA Public Relations Officer

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