Many businesses are faced with the daunting prospect of contemplating retrenchments due to the impact of COVID-19 on their businesses. Employers should, however, be aware that retrenchments are a matter of last resort and can only be undertaken after exploring all alternatives to avoid retrenchment.
For those employers who are not desirous of considering retrenching their loyal and long-standing employees, there are various alternatives to consider in order to avoid retrenchment.
Can your business avoid retrenchment?
Employers whose businesses are likely to be severely impacted by the spread of COVID-19, such as the hospitality industry, insurance sector and other service industries for example, may be thinking of retrenching some or all of their employees, simply because they will not be able to afford to pay salaries if the business itself is not generating income.
It should also be noted that before employers think of retrenchment they need to be mindful that temporary employment measures can also be considered first and foremost prior to considering retrenchment.
Reduce costs and expenditure
In an uncertain economy when every penny counts, even the smallest increase in revenue or reduction in expenses can have an impact on company profitability. As a business owner, you are always looking for ways to cut material costs, and optimise your resources.
Track and measure the operational efficiency of your business in order to adjust and optimise the use of available resources. At this time, it will also be important to reduce business costs by operating in a virtual manner whenever possible or reducing the number of your branch network into virtual, thereby saving on rentals.
Short time work
Short time work means a temporary reduction in the number of ordinary hours of work owing to reasons including slackness of trade, shortage of raw materials, vagaries of weather, breakdown of plant machinery or buildings etc. In the circumstances of the COVID-19 pandemic short time can also be implemented. Short time work is imposed as a temporary measure for a temporary period where there is only limited amount of work for an employee to do for their employer.
The reason being a massive drop in customers as a result causing many organisations in various sectors to be unable to pay their staff full-time salaries as per the norm. In this regard employees will be working far less hours in a day, week or month.
Can short time work be unilaterally imposed on employees?
Unless short time work is provided for in an employee’s contract of employment or a collective bargaining agreement in that industry, short time work cannot be unilaterally imposed on employees by the employer.
Because short time work entails a change to working hours and reduction in remuneration, in other words a change to the terms and conditions of employment, which if reported, could amount to an unlawful breach of the employment contract by the employer.
To avoid claims by the employees for a change to their terms and conditions of employment, the employee and employer need to agree to the implementation of short time work. Please note that short time work cannot be implemented without the consent of the employee.
In the same manner that consultations must take place with employees if the employer is considering retrenchment, employers must consult employees regarding introducing short time work. Employees must note and be mindful of the fact that short time work is an alternative to retrenchment. At the very least during this crisis period, an employee could earn income rather than be retrenched.
Employees may go on vacation leave or unpaid leave during the lockdown period and this could be a win-win situation for both parties since no duties were performed and no income was generated.
Before the employers resort to retrenchment due to the economic crisis caused by the coronavirus pandemic, they have to consult their employees and the trade unions to persuade the employees to take unpaid leave as an alternative to retrenchment. Retrenchment should only be resorted to when the employees have turned down the proposals of the employer to take unpaid leave.
Employers may consider a salary cut in an effort to ensure that it does not retrench any of its employees.This, however, will need to be negotiated by both parties. In the event that an employee is not agreeable to new employment terms he or she can opt to resign and this will have to be done in terms of the law and the employee will be entitled to an exit package which may be taxable. Pay cuts reduce labour costs, hoping to preserve the workforce for fast recovery.
Offer early retirement or schemes
More people have lost their jobs amid the COVID-19 crisis than any period in recent history, and for many people who are close to retirement, prospects for returning to work are bleak. Companies seeking to reduce or reconfigure their staff frequently may offer employees a package or incentives to encourage them to leave their jobs voluntarily, often before their retirement date.
Such offers are crucial because they give the employees the possibility of being compensated for leaving their job early. Baby boomers are at a particularly high risk of permanent job loss, and that could affect retirement security.
When employees are unable to render their services due to COVID-19 restrictions, the employer can also decide to lay off employees without pay. As restrictions on movement and economic activity are being relaxed, employees are progressively able to render their services, but employers may not be ready to resume business, though. Retrenchment may be justified, but it is not necessarily the best option. It is at this juncture that the continued lay-off without pay can be a very useful alternative to retrenchment. It cannot be imposed, but has to be agreed upon.
Last option (retrenchment)
If employers and employees cannot come to an agreement regarding the implementation of various employment arrangements, as a last resort, businesses may consider retrenching some of their employees. It is important to note that retrenchment is accompanied by retrenchment packages, hence the employee cannot just go empty-handed. Companies will have to comply with the Labour Act (Chapter 28:01) which details the guidelines to be followed upon carrying out retrenchment.
Employers really need to consider and contemplate any and all alternatives that may be available and they are urged to be proactive in this regard.
No one knows what the future holds, hence employees are urged to be mindful of the employers’ situation and should sincerely consider any and all alternatives that may be presented to them. At the same time employers are also advised not to take advantage of the pandemic.
Emmanuel Zvada is a global award-winning HR practitioner for 2020, HR disrupter and trusted coach. He writes in his personal capacity.