Retrenchment – A brief overview
Section 189 of the Labour Relations Act 66 of 1995 (LRA), as amended, permits an employer to dismiss employees for operational requirements or reasons.
The phrase ‘operational requirements’ is a broad term referring to economic, technical, structural or similar needs of an employer.
Before effecting such dismissals, however, the LRA places an obligation on employers to engage in a meaningful joint consensus-seeking process in an attempt to reach consensus on, inter alia, appropriate measures to avoid and/or minimise the number of dismissals.
Our current economic dilemma
With the steady decline of the South African economy, it has been found that in consultations, that there is an increase on possible retrenchments and restructuring exercises as employers seek to remain profitable or even to avoid total closure.
As employers continue to shed jobs, the number of unemployed South Africans seems to be growing daily. The situation has become so dire in our current economy. We understand the seriousness of the situation which has led to us placing greater focus and emphasis to companies, on alternatives to retrenchment in an attempt to preserve those jobs that are currently available.
Alternatives to Explore
Those alternatives, however, are usually either temporary in nature (such as a resort to short-time or temporary lay-off) or propose changes to existing terms and conditions of employment (such as a salary reduction or withdrawal of benefits).
Each of the alternatives should be explored in depth. It is important to note that implementation of these alternative means embarking on a fair process and procedure, and ensuring relevant documents and agreements are drawn up to support the decisions taken.
1. The reduction in salary. All bonuses, incentives, 13th cheques should be suspended, as well as a % cut in salary.
2. Changes to terms and conditions of employment. This would amount to a lesser term and condition being agreed upon, which will assist the company in having a positive financial impact. This could either be a temporary measure or permanent.
3. Temporary lay-off / Unpaid Leave. Employees will not be required to work for a certain period of time, or until it was operationally and financially feasible to do so.
4. Short time, placing a moratorium on Overtime or Sunday work. A reduction in hours or days worked and receiving a relative salary to the reduction. Explore the option of allowing part-time work, as some employees may want to continue studying or are looking to gladly accept half-day or part-time jobs.
5. Re-Deployment and Transferring affected employees to other jobs in the employer’s business or group. Employees can be offered alternate, reasonable employment within a group, which does not necessarily have to be the same or similar position being held by the employee.
6. Training employees for other available positions. Re-skilling employees to be able to fill other positions, and at the same time up-skilling them, hence they are multi-skilled to work in various areas that would indirectly benefit all parties.
7. Voluntary Termination. Engaging with employees and offering them an option to volunteer to go on retrenchment. This might be an option for those that are nearing retirement.
8. Commission / Travel or Vehicle Allowances / Variable Pay. Review of commission structures and consider the reduction of allowances which can be compromised.
9. New Hire / Promotions. These should be frozen, as it would add to the salary bill.
Consultation needs to be meaningful and consensus-seeking if all parties engage in the process, full disclosure is made by the employer and any exchanges by the parties are well-motivated and rational.
Dismissals for operational requirements may also only be effected as a measure of last resort.
Please stop by again. Thank you for your interest!