UNDERSTANDING OPERATIONAL REQUIREMENTS DISMISSALS

Written by Jana Ferreira

The Hairdressing, Cosmetology, Beauty, and Skincare Industry is built on personal skill, client relationships, and the agility of a small business. Salons and spas across the country range from single-chair operations to multi-branch enterprises, yet all share one common truth: business conditions change. Economic downturns, shifting client preferences, and the ever-present pressure on margins can force even a well-run salon to reconsider its staffing structure.

When that restructuring leads to job losses, the law requires employers to follow a carefully prescribed process. Failing to do so, even when the business need is genuine, can result in findings of unfair dismissal at the Commission for Conciliation, Mediation and Arbitration (CCMA) or the National Bargaining Council for the Hairdressing, Cosmetology, Beauty and Skincare Industry (HCSBC).

This article unpacks what operational requirements dismissals are, how the new Code of Good Practice: Dismissal (2025) shapes the process, and what both employers and employees in this industry need to know.

What Are Operational Requirements?

An operational requirements dismissal, commonly referred to as a retrenchment, occurs when an employer dismisses one or more employees not because of anything those employees have done wrong, but because the business can no longer sustain their employment. Under Section 189 of the Labour Relations Act 66 of 1995 (LRA), operational requirements are defined as requirements based on the economic, technological, structural, or similar needs of the employer.

In the beauty industry, legitimate operational reasons might include:

• A sustained drop in client footfall or revenue, making it financially unviable to retain all staff;

• Closure of a branch or service line (for example, discontinuing nail services);

• Introduction of technology or systems that reduce the need for administrative staff;

• Structural reorganisation following a merger or acquisition of a salon business.

An operational requirements dismissal is a "no-fault" dismissal. The employee is not being dismissed because of misconduct or poor performance. The reason lies with the employer’s business circumstances. This distinction matters enormously; an employer who uses a fabricated operational reason to avoid a proper misconduct or incapacity process is acting unlawfully, and such dismissals will not withstand scrutiny at the CCMA or the HCSBC.

The New Code of Good Practice: Dismissal (2025), A Landmark Reform

On 4 September 2025, the Minister of Employment and Labour published the new Code of Good Practice: Dismissal, effective immediately. This is widely regarded as the most significant reform to South African dismissal law in nearly three decades. The new Code repeals and replaces both Schedule 8 of the LRA (which governed misconduct and incapacity dismissals since 1995) and the separate Code of Good Practice on Dismissal Based on Operational Requirements (1999). For the first time, dismissals for misconduct, incapacity, and operational requirements are consolidated under a single, unified framework.

For employers and employees in Hairdressing, Cosmetology, Beauty, and Skincare Industry, an industry dominated by small businesses that often lack dedicated human resources departments, the new Code brings a particularly meaningful development: it expressly recognises that small businesses may follow simpler, less formal procedures, provided that the fundamental principles of substantive and procedural fairness are preserved.

The Code is not legislation in itself, but it carries significant persuasive authority. The CCMA, Bargaining Councils, and the Labour Court use it as the benchmark against which the fairness of any dismissal is assessed.

The Two Pillars of a Fair Retrenchment: Substance and Procedure

For a retrenchment to be lawful, it must be both substantively fair and procedurally fair. The absence of either will render the dismissal unfair.

1. Substantive Fairness: A Genuine Business Reason

The employer must be able to demonstrate that the operational reason is genuine, rational, and directly connected to the business needs. Dismissal must remain the measure of last resort. Before retrenching, an employer is expected to have genuinely explored alternatives such as reduced working hours, temporary lay-offs, redeployment of employees to other roles, natural attrition, or the suspension of overtime. In the salon context, this might mean first reducing the number of shifts before eliminating a position entirely.

2. Procedural Fairness: The Consultation Process

Section 189 of the LRA, read together with the new Code, sets out a detailed consultation process. The process is initiated when the employer issues a written notice to affected employees or their representatives (which, in organised workplaces, would be a registered trade union such as UASA, The Union in the Hairdressing and Beauty sector). This notice must contain prescribed information as set out in Annexure A to the new Code, a standardised template that is a notable new addition to the legal framework.

The notice of intended retrenchment must address:

• The reasons for the proposed retrenchments;

• Alternatives that the employer has considered to avoid the retrenchments;

• The number and categories of employees likely to be affected;

• The proposed method for selecting which employees are to be retrenched;

• The proposed timing and process for the retrenchments;

• The severance pay proposed;

• Any assistance the employer proposes to offer to retrenched employees; and

• The possibility of future re-employment.

The consultation must be conducted in good faith. Employers cannot treat it as a mere formality or a rubber-stamping exercise. The purpose is to enable genuine dialogue and allow for reflection before a final decision is taken. The Labour Appeal Court confirmed that employers must consult with employees before retrenching and that the decision to retrench must be the final step, not the first.

Selection Criteria: Choosing Who is Retrenched

Where not all employees in a category are to be retrenched, the employer must apply selection criteria that are fair and objective. The new Code provides that criteria generally accepted as fair and objective include:

• Length of service (the well-known "last in, first out" principle);

• Retention of critical skills or qualifications necessary for the business going forward; and

• Objective performance records where relevant and documented.

In a salon setting, where stylists may have specialist skills, such as expertise in keratin treatments, locs, or specific colouring techniques, the skills-retention criterion becomes especially important. An employer could, for example, legitimately retain a junior stylist with a particular in-demand skill over a more senior employee whose skills are less relevant to the business going forward, provided this decision is documented, disclosed during consultation, and can be objectively justified.

Severance Pay and Preferential Re-employment

An employee who is retrenched is entitled to severance pay in terms of Section 41 of the Basic Conditions of Employment Act 75 of 1997 (BCEA). The Main Collective Agreement of the HCSBC or an individual employment contract may provide for more generous terms, and employers must honour whichever is more favourable to the employee.

The new Code also reaffirms the principle of preferential re-employment: where an employer again hires employees with comparable skills and qualifications within a reasonable period after a retrenchment, the previously retrenched employees must be given preference for those vacancies. This obligation is an important safeguard against employers retrenching staff only to rehire new employees at lower rates or without employment benefits.

Industry-Specific Considerations: The HCSBC and the Main Collective Agreement

Employers and employees in the Hairdressing, Cosmetology, Beauty, and Skincare Industry are not only bound by the LRA and BCEA, but they also operate within the framework of the Main Collective Agreement of the National Bargaining Council for the Hairdressing, Cosmetology, Beauty, and Skincare Industry (HCSBC). This agreement, negotiated between the Employers’ Organisation for Hairdressing, Cosmetology and Beauty (EOHCB) and UASA, The Union, contains specific, prescribed processes that must be followed when an employer considers actions related to operational requirements.

Employers in this sector are strongly advised to consult with the EOHCB before initiating any retrenchment process. Failure to comply with the collective agreement provisions, in addition to those of the LRA and the new Code, can significantly increase the risk of a successful challenge at the Bargaining Council

Common Pitfalls: What Employers Must Avoid

The following are the most common errors made by employers in this industry:

• Using retrenchment as a disguised dismissal for poor performance or interpersonal conflict, this is unlawful and will be seen through at arbitration;

• Skipping or rushing the consultation process, treating it as a box-ticking exercise rather than genuine engagement;

• Failing to issue the Section 189(3) notice in the prescribed format as required by the new Code;

• Applying selection criteria that are subjective, discriminatory, or not discussed during consultation;

• Failing to pay the minimum statutory severance pay; and

• Retrenching and then immediately hiring new employees in the same roles without offering the retrenched employees a preference.

Practical Steps for Employers

If you are considering retrenchments in your salon or beauty business, the following practical steps will help protect you legally and treat your employees with dignity:

• Document the business case: Gather financial statements, revenue reports, or other objective evidence demonstrating the operational need;

• Explore all alternatives first: Consider reduced hours, renegotiating rent or supplier costs before arriving at retrenchment;

• Issue the written notice: Use the Annexure A template in the new Code to issue the Section 189(3) notice and ensure it covers all prescribed topics;

• Hold genuine consultation meetings: Give employees a real opportunity to make suggestions, ask questions, and propose alternatives;

• Apply fair selection criteria and document your reasoning;

• Calculate and pay the correct severance entitlement; and

• Seek expert assistance: Contact the EOHCB

In conclusion, operational requirements dismissals are among the most legally complex and emotionally charged situations any employer will face. In the Hairdressing, Cosmetology, Beauty, and Skincare Industry, where teams are often small, relationships are personal, and livelihoods are closely tied to the business, the stakes are even higher. The new Code of Good Practice: Dismissal (2025) brings clarity and consolidation, but it also reinforces that the law demands genuine fairness: a real business reason, a genuine consultation, fair selection, and proper severance.

Retrenchment should never be a shortcut. When done lawfully and with respect for the people affected, it can allow a business to survive and potentially rehire those same employees when conditions improve. When done incorrectly, it can result in costly arbitration awards, reputational damage, and lasting harm to employee relations.

Members are encouraged to contact the EOHCB before taking any steps towards retrenchment. Early and informed guidance is always more cost-effective than dispute resolution after the fact.