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Retrenchment & UIF

What is Retrenchment?

Retrenchment happens when a company is faced with the unfortunate reality that it is no longer financially capable of retaining certain employees. The result is a reduction in the number of people employed at the company so that it can continue meeting its operational requirements.

Employers may retrench employees for specific reasons which must be fair and reasonable. In addition, a fair and just retrenchment procedure must be followed.

Circumstances for Retrenchment 

•    Economic needs 
•    Technological needs 
•    Structural needs 

The court looks at the following when deciding whether the employer’s decision to retrench the employee was fair:

•    Whether there is a real and valid reason
•    Whether or not it was unavoidable 

Unemployment Insurance Fund

The unemployment insurance fund (UIF) provides short-term financial aid to individuals who have suddenly become unemployed through no fault of their own.

The UIF is funded by employees and employers who each contribute 1% of the employee’s salary every month. 

All workers who are registered with the UIF and have been paying their monthly contributions can claim from the fund if they have been retrenched, let go or if their employer becomes bankrupt.

Domestic workers who have more than one employer if one employer cancels their employment or if an employer passes away. Foreigners who are permanently employed in South Africa can also claim from the UIF.

Employees are not required to contribute to a UIF if:

•    Their contract came about as part of a Skills Development Act initiative
•    They are a traditional healer
•    They are a member of a municipal council 
•    They are an employee of the national or provincial government 
•    They are employed for 24 hours per month or less with a single employer

The Unemployment Insurance Amendment Act was signed into law in 2018 which brought with it some much-needed changes in the previous legislation.

Van Deventer & Van Deventer Incorporated – Attorneys in South Africa

Our attorneys provide professional, legal assistance with matters related to labour law in South Africa. For more information on this, please contact us.