Retrenchment is a form of dismissal due to no fault of the employee; it is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which leads to reducing its employees.

 The employer must give fair reasons for making the decision to retrench and follow a fair procedure when making such a decision or the retrenchment may be considered unfair.

 Legally a South African employee is entitled to one week’s pay for every year in a retrenchment case however many contracts come with retrenchment policies in place which will provide the employee with a greater level of severance pay than the governmental minimum.

AND THEN THE COVID-19 PANDEMIC HAPPENS!

Companies are already beginning to suffer financially as people practice social distancing and self-isolation, meaning that more social spaces like restaurants, nail bars, theatres, hotels etc lose revenue as consumers stay home. This unfortunately puts pressure on staff retention, and could lead to retrenchments.

However, government as well as the various regulations have indicated that retrenchments must be the absolute last resort after all alternative measures have been implemented.

The alternatives which should be considered are:

Possibly, instead of outright retrenchments, employers might want to look at demotions during this extraordinary time.

Despite the trying circumstances, if employers look at taking this route, they should take all labour law considerations into account before imposing demotion on an employee because should the CCMA or bargaining council find the demotion to be unfair, the commissioner has the right to:

  • Reinstate the employee into the position from which he/she was demoted;
  • award the employee compensation;
  • apply any other corrective measure that he/she may deem to be appropriate.

However, an employer should consider a demotion as an alternative to retrenchment, chiefly because a person would rather have a job with less money than no job at all.

Should an employee refuse the demotion, the employee will be entitled to severance pay, as long as the reason for refusal is justifiable.

A demotion cannot be imposed unilaterally by an employer without consulting with the employee. And must also be in writing as it is a change to the terms and conditions. Should an employer demote an employee without affording the employee the right to be heard, it could amount to an unfair labour practice with the employer being liable to the employee for either reinstatement or compensation.

An employer could also consider temporary lay-offs and skeleton staff

What is a temporary lay-off?

Where it is not possible to continue with normal business activities, employers may temporarily lay-off employees. Temporary lay-off is unpaid and is an alternative to retrenchment.  The individual is still an employee of the company however, they are unpaid until such time as normal business activity resumes.  While on lay-off employees must remain available to the company, and may be called upon at any time to resume full or partial duties.  Should an employee secure alternative employment during lay-off, they must resign from the company.

What is a temporary lay-off?

Where it is not possible to continue with normal business activities, employers may temporarily lay-off employees. Temporary lay-off is unpaid and is an alternative to retrenchment.  The individual is still an employee of the company however, they are unpaid until such time as normal business activity resumes.  While on lay-off employees must remain available to the company, and may be called upon at any time to resume full or partial duties.  Should an employee secure alternative employment during lay-off, they must resign from the company.