Section 189 Retrenchment and Severance Pay vs TFR and Collective Dismissal in Italy

In South Africa, severance pay is tied to one event: dismissal for operational requirements. In Italy, the main end-of-service payment, TFR, is paid on every exit, including resignation, and a redundancy adds procedure and other costs on top. Full comparison on Italy vs South Africa .

South Africa: s.189 consultation and statutory severance  

Under the Labour Relations Act , a dismissal for operational requirements (economic, technological, structural or similar needs) must follow section 189: consult the affected employees or their representatives on ways to avoid or minimise dismissals, selection criteria, timing and severance. Larger employers dismissing above set thresholds follow the more formal section 189A process, which may involve a facilitator.

The BCEA (s.41) sets the floor: at least one week’s remuneration for each completed year of continuous service. An employee who unreasonably refuses alternative employment loses it. No severance is due on resignation or on dismissal for misconduct or incapacity.

The Department of Employment and Labour has published the Labour Laws Amendment Bill, 2025, which would raise statutory severance to two weeks per year. It is a Bill, not law.

Italy: TFR on every exit  

TFR ( art. 2120 c.c. ) is deferred pay:

• Each year the employer sets aside annual pay ÷ 13.5, less a 0.5% contribution, roughly 6.91% of pay.
• The fund is revalued each year at 1.5% plus 75% of ISTAT inflation.
• It is paid on any termination: resignation, dismissal, end of a fixed term, retirement.
• The employee can direct future TFR to a pension fund; in companies with 50 or more employees, TFR left in the company goes to an INPS treasury fund.

For budgeting, treat TFR as part of salary, not as a contingency. On €60,000 gross a year it is about €4,150 a year.

Italy: individual redundancy  

A single redundancy is a dismissal for giustificato motivo oggettivo. The employer must show the role was genuinely abolished and that the employee could not be redeployed to an equivalent or, with consent, a lower role. Employers with more than 15 employees must first run a conciliation at the labour inspectorate for employees hired before March 2015. If a court finds the reason unjustified, the Jobs Act grants 6–36 months’ pay (3–18 for employers with 15 or fewer staff).

Every dismissal also triggers the NASpI contribution (“ticket”), about €649.73 per year of service, up to about €1,949 in 2026, paid by the employer to fund unemployment benefit.

Italy: collective dismissal  

Where an employer with more than 15 employees dismisses five or more people within 120 days in one province, Law 223/1991 applies. This is the closest match to s.189A:

• Written notice to the works council (RSU) and unions, with reasons, numbers, timing and planned measures.
• A union phase of up to 45 days, then an administrative phase before the region or ministry.
• Selection by statutory criteria (family responsibilities, seniority, technical and organisational needs) unless the agreement says otherwise.
• The NASpI ticket is tripled if there is no union agreement.

Side by side  

Budgeting an Italian exit  

For a South African finance team, the shift is from “severance only if we retrench” to “TFR always, plus notice, plus the ticket, plus negotiation risk”. A typical redundancy budget in Italy covers the accrued TFR (already in your monthly cost), the CCNL notice period or pay in lieu, the NASpI ticket, and often an incentive payment in a protected settlement so the employee waives a challenge.

Common questions from South African finance teams  

Can we agree to pay “severance” instead of TFR? No. TFR is a statutory right that cannot be contracted away or folded into salary. Any exit incentive comes on top.

Is there a minimum period of service before TFR is due? No. An employee who leaves after four months receives four months of accrual in the final payslip.

Do we need to consult before a single redundancy? Not in the s.189 sense, but you must be able to prove the role was abolished and redeployment was impossible. For employees hired before March 2015 at employers with more than 15 staff, a conciliation at the labour inspectorate comes first.

What counts towards the five-dismissal threshold? Dismissals for reasons not related to the individual worker, within 120 days, in the same province. Mutual separations are generally not counted, but a pattern of pressured exits can be challenged.

Is pay in lieu of notice allowed? Yes. The employer can pay the CCNL notice period instead of having it worked, and the amount is subject to tax and contributions like salary.

What this means if you hire through an EOR  

With an EOR, TFR is accrued monthly and included in the invoice, so there is no year-end surprise. If the role ends, the EOR runs the Italian procedure, calculates notice and the ticket, and documents any settlement in a protected forum. Read about Italian employment contracts , compare countries on Italy vs your country , and model exit costs in the calculator .

Related guides for companies in South Africa  

• LRA fair dismissal vs Italian dismissal rules
• UIF, SDL and PAYE vs INPS: the real employer cost
• BCEA vs the Italian contract and CCNL

General information, not legal advice. Planning a restructure? Contact us .