The human side of retrenchments

The latest data of Statistics SA show that the unemployment rate could be even higher than 23.5%, according to a leading newspaper. It is further reported that nearly 180 000 jobs were lost to the economy between January and March this year. 

With this trend and the current global economic downturn, many organizations are facing the need to cut employment costs in order to survive. As a result many employees are now facing the unpleasant prospect of losing their jobs and as a result their livelihood. This is the unfortunate consequences of the current difficult economic times.

Unfortunately, some employers become so focused on the legal requirements of the Labour Relations Act on retrenchments that they lose sight of the underlying principles of such a process.

The two most important factors to consider are that retrenchment is regarded as a no fault dismissal, in other words the employees are not at fault for the climate we are in. Secondly, that the process of consultation is required primarily to seek ways to prevent such dismissal from taking place, or to mitigate the effect of such dismissals.

Retrenchments are not only about complying with the law, but also about people whose lives are being severely affected by their employer’s need to survive economically. This article does not deal with the all technical requirements of the Labour Relations Act (LRA), but rather tries to direct the focus to the socio-economic issues and consequences that go with retrenchments.  Section 189 of the LRA provides for the procedural requirements for dismissals for operational reasons.

The first step in avoiding compulsory retrenchments is for the employer to consider inviting employees to apply for a voluntary severance package (VSP). This may reduce the burden of compulsory retrenchments and could reduce the risk of potential disputes. It is, however, very important not to offer voluntary severance packages, but to rather invite applications to be considered. 

The Labour Court ruled in Wiltshire v University of the North that applicants had a contractual right to Voluntary Severance Packages when they accepted the offer made. In other words, if for example a key employee you do not wish to lose, takes up the offer, it cannot be withdrawn. The discretion is thus taken away, but with applications the discretion remains with the employer.

In terms of the Labour Relations Act, in particular Section 189(7), the employer must select the employee to be dismissed according to selection criteria that have been agreed to by the consulting parties or criteria that are fair and objective. If parties are unable to reach agreement on the criteria, the employer may determine the criteria. The most widely accepted criterion is the LIFO (last in first out).

In the case of Moodley v Fidelity Cleaning Services the court found that the criteria set to retrench the applicant were entirely subjective and vague. In this case the employees were questioned about their experience, education, skills and personal qualities. What was also frowned upon was the fact that the panel took into account the personal recommendation of the manager.

The purpose of consultation must be to engage in a meaningful joint consensus seeking process and attempt to reach consensus on appropriate measures to: avoid dismissals; to minimize the number of dismissals; to change the timing of the dismissal; to mitigate the adverse affects of the dismissals and also the method for selecting the employees to be dismissed. Again, the key principle unpinning consultations is to try and avoid retrenchments as far as possible.

Although most employers tend to comply with the legal requirements for effecting a dismissal for operational reasons, the effect or impact of such processes is seldom considered and managed properly. Dealing with the human side of retrenchment is not easy. For most employees and employers it remains an emotional process, especially when one is faced with losing employees who have been serving the company loyally for many years.

Some measures for mitigating the effects of retrenchments are to provide pre-dismissal counseling, as well as post-dismissal counseling to affected employees. Effective ways of mitigating the effects of retrenchments are to provide training on matters such as dealing with your personal finances, career goals and choices, ways and strategies of re-entering the formal market, and most importantly skills for starting your own business.

Large companies have developed such programs to provide further life skills in order for people to survive. A good thing would be to seek advice from such companies in order to facilitate the necessary support for employees.

Information provided by Kevin Hollenbach, Labour Relations Specialist