When UK companies expand operations to South Africa, understanding the termination and severance rules under local labour law becomes essential. South Africa’s employment framework is protective of employees and governed by the Labour Relations Act (LRA), which mandates fair process and substantive justification for all dismissals.
This guide from Employer Of Record South Africa explains everything UK employers need to know — from disciplinary dismissal procedures and Section 189 retrenchments to severance pay formulas and CCMA dispute management. Whether you’re hiring through a direct entity or an EOR in South Africa, compliance is key to avoiding costly disputes and maintaining your reputation as a responsible global employer.
To understand how UK firms can manage staff terminations compliantly via an Employer of Record model, see how an EOR works here or explore our UK-to-South Africa HR outsourcing service.
Understanding Employment Termination in South Africa
In South Africa, employment termination must always be both substantively and procedurally fair. This means the employer must have a valid reason for dismissal and follow the correct procedures before ending a contract. The Commission for Conciliation, Mediation and Arbitration (CCMA) plays a central role in ensuring fairness and handling disputes arising from termination.
The LRA distinguishes between different types of dismissals — each with specific requirements:
- Misconduct-related dismissal
- Poor performance-related dismissal
- Incapacity due to illness or injury
- Operational requirements (retrenchments)
Failure to comply with procedural steps can render a dismissal unfair, resulting in compensation or reinstatement orders from the CCMA.
Disciplinary Dismissal Procedures in South Africa
For disciplinary issues, employers must follow a progressive and documented process. South African labour law encourages corrective action before dismissal unless the offence is serious enough to justify immediate termination.
Typical disciplinary dismissal procedures in South Africa include:
- Investigation of the alleged misconduct.
- Notice of disciplinary hearing served to the employee, detailing the charges.
- Fair hearing allowing the employee to present their case and representation.
- Decision and outcome communicated in writing.
Even where misconduct is proven, a fair hearing remains mandatory. UK employers must be aware that “summary dismissal” (instant termination) common under UK practice is rarely acceptable under South African law, except for gross misconduct such as theft or fraud.
Section 189 Retrenchment South Africa – The Process
When termination occurs for economic or operational reasons, it is known as a retrenchment, governed by Section 189 of the Labour Relations Act. This process is designed to protect employees by requiring consultation and transparency.
The Section 189 retrenchment process includes:
- Written notice to affected employees and trade unions (if applicable).
- Consultation meetings to explore alternatives to retrenchment (such as reduced hours or transfers).
- Objective selection criteria (e.g., skills, experience, or “last in, first out”).
- Calculation and payment of severance pay.
- Notice period or pay in lieu.
UK companies must treat retrenchments as a collaborative consultation, not a unilateral business decision. Documentation, minutes of consultation meetings, and proof of fair selection criteria are vital to defend against CCMA disputes later.
Severance Pay Formula in South Africa
Under South African law, severance pay applies primarily to retrenchments and certain contract terminations not related to misconduct.
The severance pay formula in SA is generally:
“At least one week’s remuneration for each completed year of continuous service.”
Remuneration includes not just basic salary but also allowances and benefits that form part of the total compensation package.
Some employers choose to offer more generous packages as part of a mutual separation agreement, particularly when dealing with senior employees or to maintain goodwill.
In cases of disciplinary dismissal, severance pay is not due — but accrued benefits like leave pay must still be paid out upon termination.
Notice and Pay in Lieu in South Africa
Notice periods in South Africa are regulated under the Basic Conditions of Employment Act (BCEA). The minimum statutory notice depends on the employee’s length of service:
- 1 week for employment of 6 months or less
- 2 weeks for 6–12 months of service
- 4 weeks for service exceeding 1 year
Employers can choose to pay in lieu of notice, meaning the employee does not work during the notice period but still receives full pay for that time. This is often preferred in sensitive cases where continued presence could disrupt operations.
UK firms must ensure these payments are made promptly and that all termination letters clearly state whether notice is being worked or paid in lieu.
Managing CCMA Disputes in South Africa
The CCMA (Commission for Conciliation, Mediation and Arbitration) is South Africa’s key forum for resolving employment disputes. Employees who believe they have been unfairly dismissed may refer a case to the CCMA for conciliation and arbitration.
Typical CCMA disputes in South Africa involve:
- Unfair dismissal (procedural or substantive unfairness)
- Unfair retrenchment
- Non-payment of severance or notice pay
- Unfair labour practices
UK employers operating in South Africa should maintain meticulous documentation, as CCMA rulings often rely on written proof of compliance with procedure. Working with an Employer of Record South Africa partner ensures all dismissals, retrenchments, and consultations adhere to local law, minimizing risk exposure.
The Role of an Employer of Record (EOR) in Handling Termination
An EOR (Employer of Record) like Employer Of Record South Africa acts as the local legal employer on behalf of UK companies. This structure simplifies compliance by managing:
- Employment contracts in line with South African law.
- Disciplinary hearings and Section 189 processes.
- Severance pay calculations and settlements.
- Representation in CCMA disputes if they arise.
Through an EOR, UK businesses can employ South African talent without establishing a local entity — while ensuring every aspect of employment, including termination, meets legal and ethical standards. Learn more about the model at how an EOR works.
Common Mistakes UK Employers Should Avoid
- Skipping consultation during retrenchments.
- Using UK templates for termination letters without localization.
- Failing to document disciplinary steps before dismissal.
- Overlooking severance entitlements or miscalculating them.
- Ignoring CCMA timeframes, leading to default awards.
By partnering with a trusted EOR, UK companies can ensure local HR and legal experts handle these details correctly.
FAQs
How should UK firms run a fair dismissal process in SA?
They must follow a procedurally fair process including investigation, hearing, and written outcome — even for misconduct or performance-related terminations.
What severance is due during retrenchment in South Africa?
The standard severance pay formula SA is one week’s pay per completed year of service, plus notice pay and accrued benefits.
Can an EOR handle exits and CCMA representation for UK clients?
Yes. An Employer of Record South Africa can manage termination, severance payments, and even represent employers in CCMA disputes.
Conclusion
Understanding termination and severance rules in South Africa is crucial for UK businesses employing staff locally. From Section 189 retrenchments and disciplinary dismissal procedures to notice and pay in lieu, compliance ensures fair treatment and protects your company from CCMA disputes.
Partnering with Employer Of Record South Africa gives UK firms peace of mind that all employment matters — including termination, consultation, and severance — are managed in full accordance with South African labour law.
Whether you’re scaling your South African workforce or managing exits, working through an EOR is the simplest, most compliant path to long-term success.
