Retrenchment

You have to go back a few years to see quite so much activity in the retrenchment space. Many large corporates, including Coca Cola, Standard Bank, SAA and Imperial Holdings are either about to or have already embarked on across the board retrenchments.
So, what are the key motivaters that would press a business to commence with reducing their workforce?

• Technology, reducing the need for specific/certain staff members.
• Outsourcing certain elements of their business.
• Bankruptcy or losses caused by mismanagement or misappropriation of funds.
• Strikes or lockouts weakening the business and customer confidence.
• Drop in sales.
• Rationalisation due to buy outs or mergers…be careful here however, in a Labour court this reason will be deemed unfair.

Labour Courts (and unless your ducks are seriously “in a row” is where you will end up if you don’t handle the process properly), look for four key areas to take into consideration when deciding whether a retrenchment was fair or not:

• Was/is there a sufficient and justifiable operational reason?
• Was fair and reasonable criteria applied when selecting the employees to be retrenched?
• Did the employer consult properly with the employee or the relevant union on measures to avoid or at least to reduce the number of retrenchments?
• Did the employer provide all and adequate information in terms of the consulting and retrenchment process?

The Labour courts have tightened up significantly on all criteria and employers indicating that retrenchments are necessary in order to just boost profits is unlikely to be enough to justify the action. It has to be clearly demonstrated that negative changes in operational circumstances are key in the process. Various case studies reveal that the employer will find themselves on the “back foot” with Labour courts not shy to either insist on disbanding the process or awarding the maximum compensation against the employer.
South Africa’s unemployment figures are a political hot potato and data is closely monitored. All and any effort is and will continue to be made to ensure that as many employees remain gainfully in work.

It’s crucial that businesses take a close look at their plans to outsource, merge or restructure. Any change in the existing scenario that adversely affects their workforce is the ultimate red flag that you must take note off.
Proper legal advice or expert opinion is no longer a “nice to have”, not only in terms of a planned retrenchment process but also on its justification.

Be warned the days of an ad hoc thumb suck, hope for the best outcomes to your retrenchment plans are gone forever.

Call us at Labour Associates if you are considering embarking on any kind of HR/IR minefield. We will be happy to either assist or completely manage the entire process on your behalf.

Keep an eye open for our next article. We are planning on sharing some thoughts on the thorny and contentious subject of background checks…yes “Big Brother” might well be watching you.

In the meantime, keep safe.