How CCMA Compensation Is Decided After an Unfair Dismissal

Key takeaways

• When a CCMA or bargaining-council commissioner finds an ordinary dismissal unfair, the first remedy question is usually whether the employee must be reinstated or re-employed. Compensation is considered when one of the statutory exceptions to those remedies applies, when the dismissal was unfair only because of procedure, or when the facts otherwise make compensation the appropriate remedy.
• If compensation is ordered for an ordinary unfair dismissal, section 194(1) of the Labour Relations Act 66 of 1995 requires an amount that is just and equitable in all the circumstances. It may not exceed the equivalent of 12 months' remuneration calculated at the employee's rate on the dismissal date. Twelve months is a ceiling, not a starting point, formula or promised award. A commissioner may award a lower amount or, after exercising the remedy discretion, no compensation.
• Retrospective reinstatement can carry back pay, but that back pay is not section 194 compensation. The Constitutional Court confirmed this distinction in Equity Aviation Services v CCMA. Keep the requested remedy, supporting evidence and calculation basis separate from settlement figures, severance pay and other employment amounts.
• | Remedy | What it does | Central question | | --- | --- | --- | | Reinstatement | Restores the employment relationship on terms no less favourable than before dismissal | Does section 193 require the employee to be returned, and from what date? | | Re-employment | Returns the employee to previous or other reasonably suitable work on ordered terms | Is a different return-to-work arrangement appropriate and practicable? | | Compensation | Orders a statutory monetary remedy without restoring employment | What amount, if any, is just and equitable within the applicable ceiling? |

1. Confirm that the dispute is in the correct forum

“CCMA compensation” is a useful search phrase, but not every dismissal remedy is decided by the CCMA. The forum depends on the true dispute, the alleged reason for dismissal, any bargaining-council coverage and the Labour Relations Act.

Ordinary dismissal disputes about conduct or capacity commonly proceed to CCMA or bargaining-council arbitration after unsuccessful conciliation. An automatically unfair dismissal claim generally proceeds to the Labour Court under section 191(5)(b). Other routes can apply to operational-requirements dismissals, discrimination claims, collective-agreement procedures and disputes within an accredited council's scope.

Before preparing a compensation case, record:

• the exact reason alleged for dismissal and the reason recorded by the employer;
• whether the challenge is substantive, procedural or both;
• the employer's legal identity, workplace and applicable sector;
• any bargaining council, collective agreement or private dispute procedure;
• the referral date, service evidence, certificate and arbitration notice; and
• the remedy requested in the referral, pre-arbitration process and hearing.

The CCMA glossary explains the institution at a general level. It cannot determine jurisdiction for a particular dismissal.

2. Reinstatement and re-employment come before a compensation calculation

Section 193 gives a court or arbitrator three unfair-dismissal remedies: reinstatement, re-employment or compensation. For a substantively unfair dismissal, section 193(2) ordinarily requires reinstatement or re-employment unless at least one listed exception applies:

1. the employee does not want to be reinstated or re-employed;
2. the circumstances surrounding the dismissal make continued employment intolerable;
3. reinstatement or re-employment is not reasonably practicable; or
4. the dismissal is unfair only because the employer failed to follow a fair procedure.

These exceptions require evidence. An employer cannot establish intolerability merely by saying that trust has broken down. In Booi v Amathole District Municipality, the Constitutional Court described intolerability as a high threshold and required weighty reasons supported by tangible evidence. A difficult, strained or sour relationship is not automatically intolerable.

Practicability is also a factual enquiry. Evidence may concern whether the role or undertaking still exists, whether suitable work is available, the period since dismissal, workplace changes and the terms on which a return could lawfully occur. It should not be treated as another label for an employer's preference not to take the employee back.

An employee who does not want reinstatement should say so clearly and understand the consequence: compensation can be considered, but it does not become automatic. Conversely, an employee seeking reinstatement should be ready to explain availability to return, the requested effective date and any answer to an asserted statutory exception.

3. Back pay under reinstatement is not compensation

Retrospective reinstatement restores the employment relationship from an earlier date chosen in the award, no earlier than the dismissal date. Amounts flowing from that restored relationship are back pay, not compensation under section 194.

This matters because the 12- and 24-month compensation ceilings do not cap back pay attached to a reinstatement order. In Equity Aviation, the Constitutional Court held that reinstatement and compensation are distinct alternatives and that section 194's limits apply to compensation, not retrospective reinstatement.

Do not combine the two concepts in a single “payout” estimate. A remedy schedule should identify separately:

• whether reinstatement or re-employment is sought;
• the proposed effective date and resulting back-pay period;
• the remuneration and benefits said to follow from restored employment;
• compensation sought only if return-to-work relief is not ordered; and
• any other claim with its own legal basis.

The arbitration glossary provides a short explanation of the evidence-led hearing that produces the award.

4. The statutory compensation ceilings depend on the claim

The applicable ceiling follows the legal character of the dispute, not the amount a party writes in a schedule.

The 24-month limit does not turn an ordinary dismissal into an automatically unfair one. The employee must plead and prove a reason covered by section 187, and the dispute usually belongs in the Labour Court after conciliation. A commissioner should not apply the larger ceiling simply because the conduct is serious or the employee asks for it.

An unfair labour practice is not a dismissal claim. It can concern specified conduct such as promotion, demotion, probation, training, benefits, suspension or discipline short of dismissal. Its 12-month ceiling sits in section 194(4), but liability, jurisdiction and the appropriate remedy still require proof.

5. “Just and equitable” is a discretion, not a months calculator

Once compensation is legally available, the decision-maker must assess the whole case. In McGregor v Public Health and Social Development Sectoral Bargaining Council, the Constitutional Court confirmed that compensation is never guaranteed and that the decision whether to compensate, and for what period, is a discretionary one governed by what is just and equitable.

Depending on the dispute and evidence, relevant considerations may include:

• whether the dismissal was substantively unfair, procedurally unfair or both;
• the nature and seriousness of the unfairness;
• the conduct of the employer and employee before, during and after dismissal;
• whether a genuine offer to correct the dismissal or restore employment was made and reasonably answered;
• the employee's financial loss, new earnings or job-search position where relevant;
• the effect of the unfair treatment and any proven impairment of dignity;
• the employee's length of service and employment circumstances;
• delay and who was responsible for it; and
• the evidence supporting or excluding reinstatement or re-employment.

No factor creates a fixed number of months. Financial loss can be relevant without being the only measure. In FAWU v Ngcobo, the Supreme Court of Appeal explained that mitigation, severance and other considerations go into the scales; they do not necessarily eliminate compensation. In an automatically unfair dismissal context, ARB Electrical Wholesalers v Hibbert likewise distinguished statutory compensation from common-law damages and held that proof of patrimonial loss is not a prerequisite to compensation.

The maximum should therefore not be requested as a default. The party should connect a proposed amount to the findings sought, the evidence and the applicable legal purpose.

6. Establish the remuneration basis carefully

For an ordinary or automatically unfair dismissal, section 194 measures the ceiling using the employee's remuneration rate on the date of dismissal. That does not mean the decision-maker simply multiplies net salary by 12 or 24.

Prepare the material that shows what the remuneration package contained at the relevant date:

• the signed employment contract and amendments;
• recent payslips and payroll records;
• evidence of regular allowances, commissions or benefits;
• the employer's remuneration schedule and applicable policy;
• proof of the dismissal date; and
• a transparent gross calculation that identifies each included component.

Whether a payment or benefit forms part of “remuneration”, how variable pay should be treated and what statutory deductions follow from an award can be disputed. Do not describe an estimated gross figure as the guaranteed amount the employee will receive. The award or settlement should state the amount, basis, due date and treatment of lawful deductions clearly enough to be implemented.

7. Keep compensation separate from other employment amounts

Compensation for unfair dismissal is not another name for every amount payable when employment ends. Separate each possible entitlement:

• notice pay under a contract or the Basic Conditions of Employment Act;
• accrued leave pay;
• unpaid salary, overtime or commission;
• severance pay in a qualifying retrenchment;
• contractual damages or another statutory claim;
• back pay attached to reinstatement; and
• compensation under section 194.

Different claims have different elements, forums, ceilings, time limits and tax consequences. A conciliation settlement may resolve several issues in one document, but it should identify what is being paid and which claims are released. A settlement number is negotiated; it is not proof of what a commissioner would award.

8. Build a remedy evidence file before arbitration

Merits evidence explains why the dismissal was fair or unfair. Remedy evidence explains what should follow if unfairness is found. Prepare both, even when liability is contested.

The evidence must be authentic, relevant and linked to a witness where necessary. A spreadsheet with a maximum figure is not proof of entitlement. The CCMA checklist can help organise the chronology, documents and witnesses without predicting the remedy.

9. Present a primary remedy and a lawful alternative

An employee should usually state the preferred remedy and the alternative if the preferred remedy is not ordered. For example, a party may seek reinstatement from a supported date and, alternatively, just and equitable compensation within section 194(1). The factual and legal basis for each should be clear.

An employer opposing reinstatement should identify the precise section 193(2) exception and prove the facts supporting it. If compensation is proposed instead, the employer should address the same just-and-equitable factors rather than relying only on the statutory ceiling.

Questions about an automatically unfair reason, fixed-term work, protected disclosure, discrimination, retrenchment, employee status, bargaining-council jurisdiction or overlapping claims can change both forum and remedy. A labour lawyer route may help with that classification, while the lawyer directory supports neutral comparison of available practitioners.

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