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

by Claire Stewart on 23/07/08 at 6:00 am
14 comments

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.

14 Responses to “Retrenchment: if it has to be done make sure you do it right!”

Retrenchment

Apr 16th, 2009

Massive layoffs and retrenchment due to some financial factors are hitting the United States. If you are not familiar with retrenchment, let me give you a hint. Retrenchment is a synonym for reduction or scaling back. A company in the middle of retrenchment, or about to be retrenched, is basically one that is losing money and has to initiate layoffs and compound job loss in order to survive. Company closure can result with too much retrenchment or economic slowdown. The economy is currently in a retrenched state, and the forecasts are for both a turnaround by years’ end, or for extended doom and gloom. It’s another word meaning the same bad thing; don’t let the conflagration of business terminology confuse you. Regardless, a lot of us would give quick payday loans to stem retrenchment.
Constance Thusini

Dec 1st, 2010

Please I need help,I resently got retrenched while I’m on maternity leave and my manager told me that my package will only be a 1 month’s notice,is this fair?please tell me what should my package look like since I’ve been with the company for 3 full years.My email address:thusinicn@gmail.com
Zelda van Gastel

Jan 17th, 2011

I was unfair retrenched, I’ m so, so disappointed in this company they effected in my personal lives, and lost the love of my live, and I can’t imagine how ridiculous it is! really I’m in a terrible state now at the moment of cause of this company I work for!
zelda van Gastel

Jan 17th, 2011

I need assistant I worked through a recruitment agency PAG – Constantia Kloof, and the company I worked for is South African National Blood Service they are called me in last year, and said to me the position I worked in is going to be effected but law is after 6mnth’s you are permanent! I worked almost 3years no permanent contract, they wants me out of this company! they give me a month salary, they dint pay out my retrenchment package or my other leave money please be so kind to assist me my email address are zvgastel@gmail.com
Lizelle

Mar 1st, 2011

We were twe employees that was offered a retrenchement package end October last year. We both excepted, my colleage left straight away and I was asked to stay on for a while, later I was asked if I would consider staying on as they know that they can’t cope without me. Now they are attacking me in all directions trying to get me to quit. I never received a letter to state that I am re-instated, nor did I receive my retrenchement package. What should I do????
Sylvia

Jun 21st, 2011

Hi there,
I am in the infortunate position of having to retrench one of my staff members. I run and own a skin care clinic and currently have 3 therapists. The therapist i need to retrench has been working the longest for me (4 yrs) and earns a basic salary way above the others. For the past few months she has not performed at all and i feel i am paying her to sit at work and play on the computer. My other 2 therapists are bringing in work and out performing her by far. Due to the economic climate, I cannot afford to employ this girl anymore as she is not bringing in any business and not contributing at all. Business is reqally tough and financially I cannot afford a therapist who is not performing. Please advise as to how I can dismiss or retrench her as this would not be the LIFO policy.
Looking forward to your reply
Felix-1983@live.com

Aug 16th, 2011

My company retrench me and dont give me my money,what do i do
Fred Roed

Aug 17th, 2011

Hi Felix – contact the CCMA: 0861 16 16 16 or email info@ccma.org.za – they will be able to advise you.
Moshema

Nov 2nd, 2011

I was retrenched in 2009 through LIFO process which does not affect me. i was then called shortly within two weeks to be engaged as fixed term contract renewable annually since may 2009 till todate. is it fair with me all this years working without joy of BCEA because i am losing pension, 13th cheque, medical aid, housing allowance and worst of all, i am not credit worthy. please reply via email.
Rodney

Nov 9th, 2011

We have finalised our retrenchments all issues pertaining to retrenchment packages have been agreed too.
How ever due to an over run on prodution we have work in progress that needs to be completed.
We would like to offer some of our retrenched staff a fixed term contract for 3 months to complete the work, after which the department will close.
Are there any labour issues that I need to consider?
Many Thanks .
Lungi

Nov 24th, 2011

Hi, I have worked for a company for 3 years, I was on contract for the first two years (2008 -2010) then when my contract expired it was renewed this year May till 2013. But now I have been retrenched and I was told that they can’t pay me the retrenchment package because I don’t have a complete year with my current contract. They told me they can’t consider the other two years I’ve worked. Is it true, and is that fare?
Annette

May 22nd, 2012

Working for a restaurant as book keeper and p.a. for one year. Now they want to retrench as it is not going well with the business. What is the proper retrenchement package and procedure.
lauraine

Jun 19th, 2012

hi ive been retreched so i work for the company for 6years what will be my package
rachel

Dec 20th, 2012

Hi
i realy need help as i’ve been retrenched, i’ve work with the company for full 5yrs & my previous owner sold the company 2 new management & i worked with them for a full year so i’ve been retrenched, i would like to know how will i get my package & am i entitled to get a full salary for the next coming 3 months, & how this thing of first in last out work?