Times are tough. A number of factors such as the increasing petrol price, the impending new minimum wage and ever more competitive business landscape,
have many companies feeling the pinch and exploring creative ways to minimise costs and maximise profits. Staff retrenchments is one unfortunate option under consideration when it comes to cutting costs. However, not all organisations are fully aware of the impact of retrenchment, for both the staff in question as well as their business.
Retrenchment is a lengthy and arduous process, weighed with risks, and both moral and legal considerations, that businesses need to examine before embarking on this decision. Although there are many instances where it is unavoidable, businesses should ensure that retrenchment is their absolute last resort.
Reasons to retrench
It’s vital for businesses to be able to prove that their reasons for retrenchment are valid and legitimate.
The Labour Relations Act dictates that retrenchments need to be shown as fair, objective and a business’s last resort. Legally, retrenchments may only be affected if a business is no longer economically sustainable, a restructure necessitates them, or if technology - implemented for efficiency reasons - results in positions becoming redundant, adding that failure to meet any one of these reasons for retrenchment can land a business in hot water with the Commission for Conciliation, Mediation and Arbitration or Labour Court.
Considering all options
Businesses need to engage with their staff in a collaborative and constructive manner to ensure that a consensus is reached, deeming retrenchment to be unavoidable and the only viable option.
Discussion is key. A staff member or group of employees may have feasible ideas worth exploring to avoid retrenchment. Where no alternatives can be realistically found, the business needs to communicate this, along with all the relevant details such as severance package entailments, processes to be followed and what manner of support the business is willing and able to provide following termination of employment.
On a cautionary note, it's advised that employers who are forced into a position where retrenchments are inevitable need to follow the proper procedures and engagement channels, as laid out by the LRA. Failure to do so could lead to a termination being considered an unfair dismissal, which may result in significant penalties of up to twelve months’ salary per individual, being paid.
How to retrench
Where an organisation has investigated every possible alternative to retrenchment, through careful discourse with staff – and possibly even engagement with employment specialists and legal counsel, they then need to proceed according to LRA guidelines. This protects their own interests while ensuring that retrenched staff are treated with dignity and respect and given every possible reassurance for their employment future.
There are many ways that businesses can provide support and assistance to retrenched staff, beyond the prescribed financial compensation. This could include providing references, offering supplementary training, or making resources available for them to seek new employment, including time off for interviews.
In the event that retrenchment is necessary, there are ten basic steps that organisations can follow, in order to adhere to legal requirements and maintain open, clear communication channels:
1. Ensure the reasons for proposed retrenchments are clearly and concisely communicated with all parties
2. Provide details for all possible alternatives considered by the organisation, along with reasons for their rejection
3. State the number of employees likely to be affected
4. List the job categories in which the affected employees are currently employed
5. Specify the proposed method for selecting which employees are to be retrenched
6. Provide a clear timeline of when the terminations are likely to take effect
7. Specify the proposed severance packages
8. Be clear about the assistance that the organisation is willing to offer to employees who are likely to be retrenched
9. Clearly specify if future re-employment opportunities will be – or are likely to be – possible
10. Provide a clear statement for twelve months preceding the retrenchment which details the number of employees employed, the number of employees dismissed, and the reasons for dismissal based on operational requirements
Retrenchment is often a very tumultuous time in an organisation, for both the employer and employees. Confusion and panic can be avoided if the organisation ensures that they communicate clearly and effectively with all members of staff, and the organisation can avoid negative entanglements with the law if they follow the right procedures.
There is a better way
One of the options that businesses can consider, which may help avoid retrenchment altogether, is to employ the services of a Temporary Employment Services (TES) provider.
TES providers take on the responsibility of employment themselves. So should the organisation find itself in a position where they have to downscale their staff requirements, they simply terminate their agreement with the TES provider. The TES provider then reassigns the staff to other contracts, providing them with employment opportunities elsewhere, while freeing the organisation of any obligation.
In conclusion, TES providers are also able to provide assistance to organisations who are faced with no alternative but to retrench, whether it be from a legal perspective, or stepping in to smooth the process between the organisation and affected employees.
Tebogo Moalusi is the Industrial Relations Director at Workforce Staffing Solutions.