Retrenchments

Retrench, restructure, streamlining operations or saving your business on overheads! But where to even start?

Considering changes to minimum wages in South Africa coupled with rising costs and a struggling economy, many employers are unfortunately facing the reality of considering cutting jobs.

As this question comes up more and more, we thought we would highlight a few important aspects that should be considered before implementing such a decision.

Section 189 and 189A in the Labour Relations Act (“LRA”) gives the basic guidance to the important factors that must be taken into consideration before an employee may be terminated based on operational requirements.

From the onset the LRA is clear that once an employer contemplates dismissing an employee or employees for operational requirements, he/she must consult with the employee, his Union if applicable as well as any individual who should be consulted with in terms of any collective agreement.

Based on the first part of Section 189, the important factor to remember is that an employer cannot simply make the decision, consult with the employees regarding his decision and then finalize the terminations. The Operational Requirement process/retrenchment process is an intricate process whereby both the employer and employee must partake in and the onus of supplying alternatives in an attempt to avoid termination weighs heavy a burden on both parties.

Section 189 stipulates that when an employer contemplates retrenchment, he must first issue the employee’s most likely to be affected as well as their representative bodies with a notice to consult. The factors that need to be contained in the notice that must be consulted on range from the reason for possible retrenchments, alternatives, number of employees, selection criteria, timeline, severance pay, assistance that can be offered, future re-employment as well as the number of employees that’s been retrenchment in the previous 12 months.

Having mentioned the aspects that need to be consulted on, the most crucial in any of these processes are truly not to jump the gun and run through them like ticking off a camping checklist, but to truly spend time on the critical factors. From the onset it must be established that there is a bona fide reason for considering retrenchment and if this factor has been established, the process moves to the next critical point namely “alternatives”. Consultation between the parties can only remain alive as long as there are reasonable alternatives to consider avoiding retrenchment.

Only once it has been established that there are no reasonable alternatives from either party to consider, can the process progress to finalizing timelines, severance pay, assistance etc.

As you may deduce from the above the Operational Requirement process or Retrenchment process is not a light or easy one and is technical even for some of the most advanced individuals. The above short summary is purely a drop in the bucket of the full process and the risks involved if not done correctly.

The last thing a business needs going through this process to save them financially is to end up with legal cost implications as a result of not conducting the process correctly.

Therefore, please feel free to contact any of our advisers for more information on this aspect or any other Labour Related queries.

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