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Retrenchment: is there an alternative?

Retrenchment should be a last resort, especially in the current climate. Here are some possible alternatives.

The pandemic has placed our economy under enormous pressure, and few businesses are exempt. It’s natural for companies to look to retrenchment as a way of saving on costs – but, while the urge to cut payroll is understandable, it carries severe implications; not only for the individual but for the business itself, which stands to lose out on valuable skills.

With this in mind, we urge our members to make contact with the RMI’s IR specialists to provide guidance while traversing this minefield. We further urge members to consider the following alternatives before embarking on a retrenchment exercise (while following the correct procedures as stipulated by the Labour Relations Act (Sect 189 & 189A), and once all financial relief options have been explored and exhausted:

Working from home
With this option, staff members are able to work remotely, according to flexible work arrangements.

Reduced work hours (Short Time)
Here, the employee is able to keep their job but works shorter hours. It is important to note that this is considered a temporary remedy. Any employer wishing to implement Short Time must advise their staff no later than the previous day from when Short Time will be implemented. It is also advisable to give employees in the same category the opportunity to work Short Time on alternate days so that their earnings are not too drastically affected. This is a good solution if there is not enough work to cover payroll for all employees. It must be remembered that the Main Collective Agreement sets out criteria that employers must adhere to when Short Time is implemented and the reporting of such Short Time to the Motor Industry Bargaining Council.

Decreased remuneration
This option is recommended when a business needs to retain all staff members but does not have enough income to cover its payroll immediately. Employers need to consult an Industrial Relations Specialist to ensure this strategy is implemented fairly and must make sure that all employees face the same reduction. It is considered a temporary measure. 

Temporary Lay-Off
This is not considered a dismissal; rather, it is a temporary layoff made in response to operational requirements beyond the employer’s control – for example, if a client fails to make payment on an order or fails to deliver an order; if the delivery of orders is delayed; if power cuts bring production to a halt; or if weather circumstances negatively affect operations. Because the employee is not reporting for work, the employer is not obliged to pay their remuneration. Instead, they will be able to access funds from the Unemployment Insurance Fund.

It will be noted that the above alternatives in essence require a change in conditions of employment and must therefore be effected via means of consultation. Therefore, retrenchments should be the final option. Retrenchments are considered to be non-fault dismissals and implemented where employers have suffered economically and seized operations. The above clearly outlines that retrenchments could become a difficult obstacle course and thus highly advised that contact is made with your nearest Industrial Relations Specialist to ascertain if there are alternative solutions that may be applied before embarking on a retrenchment exercise.