A dismissal in South Africa is only fair if it is both substantively fair — there is a good reason — and procedurally fair — a proper process was followed. The Labour Relations Act recognises three fair reasons: misconduct, incapacity, and operational requirements. Most employers who lose at the CCMA do not lose because the reason was bad. They lose because the process was.
This article covers the framework and the payroll obligations on termination. Dismissal is a legal matter with real exposure, and the process itself should be run with labour law advice.
The two tests
Substantive fairness — is there a fair reason? Did the employee actually do what is alleged, is the rule reasonable, was it consistently applied, and is dismissal an appropriate sanction?
Procedural fairness — was a fair process followed? Was the employee told what they were accused of, given time to prepare, allowed to state their case and be represented, and given a decision by someone impartial?
Both are required. A genuinely guilty employee dismissed without a hearing has been unfairly dismissed, and the remedy can include reinstatement or compensation of up to 12 months' remuneration — or up to 24 months where the dismissal is automatically unfair.
The three fair reasons
1. Misconduct
The employee did something wrong — theft, dishonesty, insubordination, absenteeism, breach of a workplace rule.
A fair process generally involves:
Investigation before any decision
Written notice of the allegations, with enough detail and enough time to prepare
A hearing where the employee can state their case, call witnesses and be represented by a fellow employee or union representative
An impartial chairperson — not the person who investigated or laid the complaint
A decision communicated in writing, with reasons
A right of appeal where the disciplinary code provides for one
Progressive discipline is the norm. Dismissal for a first offence is generally reserved for serious misconduct such as theft, dishonesty, assault or gross insubordination. Dismissing for a minor first offence is usually substantively unfair even where the process was correct.
Consistency matters. Dismissing one employee for conduct that was tolerated in others is a common and expensive failure.
2. Incapacity
The employee cannot do the job — through poor performance, ill health or injury.
Poor performance requires the employer to have set a standard, told the employee they were not meeting it, given them a fair opportunity to improve, provided reasonable support and training, and considered alternatives before dismissing.
Ill health or injury requires investigating the extent of the incapacity, the likely duration, whether the employee can be accommodated or given alternative work, and only then considering dismissal.
Incapacity is not misconduct, and treating it as a disciplinary matter is a procedural failure in itself. Incapacity dismissals are among the most commonly overturned at the CCMA.
3. Operational requirements — retrenchment
The business needs to reduce headcount for economic, technological, structural or similar reasons.
Section 189 requires a consultation process, which must include:
Written notice inviting consultation, setting out the reasons, the alternatives considered, the number of employees likely to be affected and the selection criteria
Genuine consultation on ways to avoid or minimise dismissals, the timing, and severance
Fair and objective selection criteria — LIFO, skills, or agreed criteria
Severance pay of at least one week's remuneration per completed year of continuous service
Closing the business is a retrenchment. "We shut down" is not a defence to an unfair dismissal claim. See how to close down a business properly.
Automatically unfair dismissals
Certain dismissals are automatically unfair regardless of process, and carry compensation of up to 24 months' remuneration.
These include dismissal for pregnancy or any reason related to it, for participating in lawful union activity or a protected strike, for refusing to do the work of someone on a protected strike, for making a protected disclosure, or on discriminatory grounds such as race, gender, sexual orientation, religion, disability or age.
Constructive dismissal — where an employee resigns because the employer made continued employment intolerable — is also treated as a dismissal.
Probation is not a free pass
Dismissing during probation still requires fairness, though the standard of process is less onerous.
The employee must have been given evaluation, instruction, training, guidance and counselling, a reasonable opportunity to improve, and an opportunity to state their case before a decision.
"They were on probation" is not a defence to an unfair dismissal claim on its own.
Notice periods
Under the BCEA, minimum notice is:
| Length of service | Minimum notice |
|---|---|
| First 6 months | 1 week |
| 6 months to 1 year | 2 weeks |
| More than 1 year | 4 weeks |
Farm workers and domestic workers employed for more than six months are entitled to 4 weeks.
A contract may provide for longer, and where it does, the contractual period applies.
Notice may be paid in lieu of being worked.
Summary dismissal without notice is only available for serious misconduct, and only after a fair process.
The payroll obligations on termination
This is where the compliance work sits, and it is frequently done badly.
On the final payslip:
| Item | Notes |
|---|---|
| Salary to the last day worked | |
| Notice pay, if not worked | Taxed as remuneration |
| Accrued leave paid out | Days × daily rate. See annual leave entitlement |
| Severance pay, where retrenchment | At least one week per completed year of service |
| Pro-rata bonus, if contractually owed |
Unused sick leave is not paid out.
A tax directive is required before paying severance. Severance is taxed under the retirement and severance lump sum table rather than the ordinary tables, and paying it without a directive means the wrong amount is almost certainly withheld — with the shortfall falling on the employer.
Also required:
Update the UI-19 with the termination date and the correct reason code, so the employee can claim from UIF. The reason code determines whether they can claim at all
Issue the IRP5 through the EMP501 reconciliation
Ensure the employee has a valid income tax number — from the 202602 reconciliation period, a missing number rejects the entire submission, and chasing a departed employee is considerably harder
Provide a certificate of service, which the BCEA requires
Keep the records for three years after termination.
Why employers lose at the CCMA
No hearing, or a hearing in name only. The most common failure. A conversation in the corridor is not a disciplinary enquiry.
The chairperson was not impartial. The manager who caught the employee cannot also decide the outcome.
Inconsistent treatment. Others did the same thing and were not dismissed.
Sanction too harsh. The misconduct was real but did not warrant dismissal.
No written record. No allegations in writing, no minutes, no outcome letter. In a dispute, undocumented process is treated as process that did not happen.
Incapacity handled as misconduct. Poor performance and ill health require support and accommodation, not discipline.
Retrenchment without section 189 consultation.
The pattern: almost all of these are documentation and process failures, not disagreements about the facts.
Frequently asked questions
What is the correct procedure to dismiss an employee in South Africa? The dismissal must be substantively fair — a fair reason among misconduct, incapacity or operational requirements — and procedurally fair. For misconduct that generally means an investigation, written notice of the allegations with time to prepare, a hearing where the employee can state their case and be represented, an impartial chairperson, and a written decision with reasons.
Can I dismiss an employee for a first offence? Only for serious misconduct such as theft, dishonesty, assault or gross insubordination. Progressive discipline is the norm, so dismissing for a minor first offence is usually substantively unfair even where the process was correct.
What notice period must I give? Under the BCEA, one week during the first six months, two weeks from six months to a year, and four weeks after a year. Farm and domestic workers employed more than six months are entitled to four weeks. A contract may provide for longer, and notice may be paid in lieu of being worked.
Do I have to pay severance when I dismiss someone? Severance is required on retrenchment — at least one week's remuneration per completed year of continuous service. It is not required for dismissal for misconduct or incapacity, though notice pay and accrued leave are payable in all cases.
Do I need a tax directive to pay severance? Yes. Severance is taxed under the retirement and severance lump sum table rather than the ordinary tax tables, and paying it without obtaining a directive from SARS means the wrong amount is almost certainly withheld, with the shortfall falling on the employer.
Can I dismiss someone during probation? Yes, but fairness still applies, though the standard of process is less onerous. The employee must have received evaluation, instruction, training, guidance and counselling, a reasonable opportunity to improve, and an opportunity to state their case.
Is closing my business a retrenchment? Yes. Closing a business is a dismissal for operational requirements, which requires a section 189 consultation process, notice, severance of at least one week per completed year of service, and accrued leave paid out.
What must I do on payroll when an employee leaves? Pay salary to the last day worked, notice pay if not worked, accrued leave and any severance, obtain a tax directive before paying severance, update the UI-19 with the termination date and reason code, issue the IRP5 through the EMP501 reconciliation, and provide a certificate of service.
The payroll side, handled properly
Dismissal is a legal process and should be run with labour law advice. What sits on our side is everything that follows — the final payslip, the tax directive, the UI-19 update that lets the employee claim, and the IRP5 that has to reconcile.
Smartbook handles termination payroll including severance directives and UI-19 updates, and keeps employee tax registrations current so a departure does not block your EMP501.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. This article covers the framework and the payroll obligations on termination. Dismissal is a legal matter with significant exposure — obtain labour law advice before dismissing an employee. General guidance, not legal advice.
Primary sources: Department of Employment and Labour — Labour Relations Act · Department of Employment and Labour — Basic Conditions of Employment Act · CCMA · SARS — Pay As You Earn