On 4 September 2025, the Minister of Employment and Labour published the new Code of Good Practice: Dismissal under the Labour Relations Act, 1995 (“LRA”). The Code is now in force and represents the most significant reform to South African dismissal laws in nearly three decades.

The Code consolidates and replaces both the Schedule 8: Code of Good Practice on Dismissal (which had guided dismissals since the inception of the LRA) and the Code of Good Practice on Dismissal Based on Operational Requirements. For the first time, dismissals for misconduct, incapacity, and operational requirements are dealt with under a single framework.

This reform is not merely a consolidation exercise. It reflects developments in case law since 1995, incorporates evolving understandings of workplace fairness, and introduces new concepts and processes aimed at both improving legal clarity and acknowledging business realities.

Why This Matters

Section 188 of the LRA provides that a dismissal is unfair if the employer cannot show that it was both (1) for a fair reason, and (2) procedurally fair. Until now, guidance on what that meant was fragmented across multiple codes. The new Code provides a single point of reference for employers, employees, arbitrators, and the courts.

All forms of dismissal now fall under one document, with cross-cutting principles that apply in every case. This provides clarity, reduces duplication, and underscores that fairness is the thread running through every dismissal, regardless of the context.

Against this backdrop, the new Code introduces a number of important changes. Below, we examine the key developments in greater detail.

Procedural Flexibility and the Role of Small Employers

The Code recognizes that strict procedural formality is not always practical, especially in smaller businesses without HR capacity. For such employers, simpler and less formal procedures are permitted, provided the core requirements of fairness under section 188 of the LRA are respected. At a minimum, an employee must be informed of the allegations, given an opportunity to respond, and notified of the decision.

Fairness remains the benchmark. Even where processes are less formal, employers must be able to show that the dismissal met the substantive and procedural standards required by the LRA.

Expanded Grounds for Incapacity

The Code broadens incapacity beyond its traditional focus on poor performance and ill health. Notable inclusions are:

• Incompatibility: Recognized for the first time as a form of incapacity. This covers situations where an employee’s behavior, personality, or inability to integrate disrupts the workplace. Employers are expected to attempt alternatives such as counselling or mediation before dismissal.
• Imprisonment: Where an employee is incarcerated and cannot perform contractual duties, incapacity may justify dismissal. Employers must still follow a process, even where alternatives are limited.
• Substance Abuse and Similar Circumstances: Dependency on drugs or alcohol may also be addressed as incapacity. Employers should consider rehabilitation or assistance before dismissal is contemplated.

Probation and the New Emphasis on Suitability

Probation, historically aimed at testing performance, is expanded under the new Code to include suitability. This covers conduct, cultural fit, and attitude in addition to performance.

Employers must, however, respect fairness even during probation. Section 188 of the LRA still requires a fair reason and a fair process. The Code confirms that employees on probation must:

• Receive regular feedback and opportunities to improve.
• Be given guidance and support if shortcomings are identified.
• Have the right to be heard before termination, including representation.

The broader test of suitability provides employers with more flexibility, but also requires structured probation reviews and careful documentation to avoid disputes. In practice, incompatibility or cultural fit can be a particularly sensitive ground, and employers will need to show that any disharmony is serious and persistent, that fair steps such as counselling or mediation have been attempted, and that the employee has been given a genuine opportunity to respond and improve. General concerns about attitude or culture, without objective evidence or process, are unlikely to be sufficient.

Progressive Discipline and Exceptional Misconduct

The Code reaffirms that dismissal should be a last resort. Progressive discipline, such as warnings and counselling, remains the preferred approach.

However, the Code also recognizes that certain misconduct, such as theft, assault, or gross dishonesty, may justify dismissal for a first offence. In such cases, dismissal may be fair if the trust relationship is destroyed.

Employers may use informal procedures where appropriate, and in exceptional circumstances, may deviate from strict formalities if the process remains fair under section 188 of the LRA.

Substantive Fairness

The Code emphasizes that fairness is both procedural and substantive. To assess substantive fairness, employers must consider:

• The importance of the rule breached.
• The harm caused by the conduct.
• Whether the employee admitted responsibility and took corrective action.
• The employee’s disciplinary record.
• The employee’s level of responsibility within the organization.

This reflects the principle in section 188(1)(a) of the LRA, requiring a fair reason for every dismissal.

Retrenchments Under the LRA

One of the most significant changes is the integration of operational requirement dismissals. Section 189 of the LRA obliges employers to consult when contemplating retrenchments. The Code builds on this by codifying procedural requirements.

Key features include:

• Section 189(3) Notice: Employers must issue a notice in the prescribed format annexed to the Code. The notice must set out the reasons for retrenchment, alternatives considered, selection criteria, severance pay, and re-employment prospects.
• Good-Faith Consultation: Employers must consult meaningfully with employees or their representatives on the issues raised in the section 189(3) notice.
• Fair and Objective Selection Criteria: The Code reinforces that criteria such as length of service, skills, and qualifications are generally fair, while subjective criteria must be justifiable.
• Severance Pay: Section 41 of the Basic Conditions of Employment Act, 1997 requires at least one week’s remuneration for every completed year of service. The Code confirms this standard.
• Preferential Re-employment: Employers are encouraged to consider retrenched employees for re-employment should opportunities arise.

The incorporation of retrenchments underscores that dismissals for operational requirements are subject to the same fairness principles as other dismissals, with additional statutory safeguards under the LRA.

Consistency and the Restorative Approach

The Code reaffirms that disciplinary sanctions must be applied consistently. Employees who commit similar acts of misconduct should generally face similar consequences, although differences may be justified if the employment relationship is irreparably broken in one case but not in another.

The broader philosophy of the Code remains restorative. Dismissal is a measure of last resort, appropriate only when corrective steps have been exhausted or the misconduct is so severe that continued employment is untenable.

Practical Implications for Employers

The new Code requires employers to take several steps:

• Review Policies: Disciplinary codes, probation policies, and retrenchment procedures must be revised to align with the new Code. Retrenchment notices must follow the prescribed section 189(3) format.
• Train Managers and HR Teams: Training should address the expanded grounds of incapacity, the new emphasis on suitability in probation, and the procedural flexibility available to small businesses.
• Document Processes: Employers must keep records of warnings, counselling, probation feedback, and retrenchment consultations to demonstrate compliance under section 188 of the LRA.
• Strengthen Probationary Processes and Practices: Reviews should include suitability and performance, with documented feedback and guidance.
• Monitor Consistency: Disciplinary outcomes should be reviewed to ensure comparability, with reasons recorded if different sanctions are imposed in similar cases.