Ideate

Retrenchment: if it has to be done make sure you do it right!

by Claire Stewart on 23/07/08 at 6:00 am
1 comment

As this tough economic climate really digs in, it’s an unfortunate reality that businesses, both big and small, may need to retrench staff. It’s something that every business owner and employee dreads… but if it has to be done then make sure you do it right!

Retrenchment is covered in the Labour Relations Act and, in fact, has its own Code of Good Practice that lays out exactly what is required of owners and managers when retrenchment is on the cards. (Check out www.labour.gov.za to see a view the Act and Code).

Because retrenchment is a “no fault” dismissal and because of its human cost, the Act places particular obligations on an employer, most of which are directed toward ensuring that all possible alternatives to dismissal are explored and that the employees to be dismissed are treated fairly.

It’s worth making sure that procedures are correctly followed. There have been many cases brought before the CCMA and Labour Court and the consequences can either be costly, or the employer can be required to reinstate their staff.

So this is how it needs to be done:

1.Consultation

The key to carrying out the process correctly is consultation, consultation, consultation.

Employers need to consult with employees right at the beginning of the retrenchment process i.e. as it becomes a reality that the business might need to retrench. All relevant information must be disclosed and employees asked to come up with any viable alternatives or ideas to push the timeframes out. Examples of this could be significant cost cutting in other areas, ways of improving cashflow, reducing debtors or increasing profits/business.

2.Selection

The correct criteria must be used when selecting which employees will be retrenched. The ideal is for both parties to agree on who should be retrenched but if not generally the LIFO principle (Last In First Out) is utilised. Employers must make sure that they don’t inadvertently discriminate against a fundamental right e.g. selecting only part-time workers for retrenchment might discriminate against women, since women are predominantly employed in part-time work.

3.Exceptions

Exceptions to LIFO can be made such as:

-  employees who are part of agreed affirmative action programmes;

-  employees whose functions and skills are fundamental to the successful operation of the business.

These exceptions should however be treated with caution.

4.Timeframes

Timeframes for the retrenchment process aren’t stipulated however there must be adequate time for proper employee consultation and consideration of all alternatives.

5.Retrenchment packages

The minimum retrenchment retrenchment package is one week’s remuneration for each completed year of continuous service with the employer. Most organisations pay more than this though (the average is 2-3 months salary).

6.Record

Make sure that EVERYTHING is recorded in writing- from the initial consultation with employees and the information given at that meeting, to the final termination agreement signed with each retrenched employee.

A more detailed look at the retrenchment process and impact on employees will be published in the Your Business magazine’s August/September issue. If you have any questions in the meantime just send me an e-mail.

Bye for now!

Claire Stewart is the founder of PeopleWise, an HR and Employment consulting service. Like Neo in the Matrix, Claire sees through the convoluted mess of SA employment law and makes sense of it for you, loyal Ideate reader. View more articles by Claire Stewart.

Related Articles

• What do you mean you’re now a permanent employee?!?!?
• Employers: have you remembered to submit your Employment Equity Reports?
• The Training Lay-off Scheme
• Time to submit your Employment Equity Report, or is it?
• A new feature on Ideate: Small Business HR and Employment