by Louise Botha, SIG Labour Specialists
The COVID-19 pandemic has placed immense strain on businesses, as government lockdown and movement control make it cumbersome to secure new business or continue with ongoing projects. Many businesses in South Africa are facing financial difficulties, which have been exacerbated as the pandemic continues, and a natural consideration is whether cost-cutting measures, such as retrenchments or lay-offs may be legally undertaken.
May employers resort to retrenchment due to the COVID-19 outbreak?
Retrenchment is a form of dismissal due to no fault of the employee. It is a process whereby the employer reviews its business needs to mitigate losses by reducing the size of its staff component. If a company is facing legitimate financial difficulties because of the COVID-19 pandemic, it has prima facie grounds to reduce its workforce and to retrench certain employees.
Before embarking on the retrenchment process, employers must first exhaust other means, before opting to retrench employees. Suitable alternative considerations include reducing working hours, limiting the hiring of new employees, reducing or limiting overtime, reducing employees’ wages or entering into a temporarily lay-off agreement with employees.
While salary reduction is one of the recommended steps to be taken to avoid retrenchment, it is advisable that the consent of the employees be obtained for any reduction in salary or working hours. A salary reduction may be viewed as a unilateral change of the employees’ terms of employment, if such reduction was undertaken without the express consent of the affected employees.
In this regard, employers should communicate transparently with their employees about the reason for the salary reduction and explain that this is an attempt to prevent more drastic action, such as a retrenchment. An employer may also want to consider a corresponding reduction in working hours to justify the salary reduction.
It is strongly recommended that employees first be consulted regarding any anticipated reduction in salary, and where unionised employees are involved, such consultation should include unions involved.
We at SIG Labour Specialists are willing to assist all employers with all labour-related matters, including the facilitation of retrenchment consultations, short-time consultations, salary reduction consultations and any related matter.
For more information, please call +27 (0)12 362 1427 or email firstname.lastname@example.org.