There are a number of alternatives to retrenchments, which are suitable to both employees and employers. Employers must consider alternatives to proposing dismissals for operational requirements. If they do not do so the dismissals will be found to be unfair.
Companies should look into reducing their operational expenditure to find savings that would allow them to avoid retrenching employees.
Some businesses see the current lockdown as being a short-term difficulty, which, despite having a massive impact on operations, can be overcome. They are therefore opting to make decisions which preserve their workforce, rather than losing skilled and experienced members of staff.
As the below options are presented as alternatives to retrenchments, it is suggested that they be proposed as such, under a consensus seeking process, in terms of the Labour Relations Act. Employers are cautioned to ensure that any actions implemented are procedurally and substantively fair.
SUPPORT MEASURES Companies can make use of support measures implemented by government such as the COVID-19 Temporary Employer/Employee Relief Scheme and the Debt Relief Fund; and financial relief measures provided by banks such as loan installment relief and preferential interest rates for COVID-19 funding.
REMOTE WORKING AND FLEXIBLE WORKING ARRANGEMENTS Whilst some tasks require an employee to be physically present at work, many are capable of being performed remotely. Many employers have required employees to work from home, when possible to do so. This has proven advantageous to employers and employees, as the business of the employer continues to operate.
LAY-OFFS A lay-off is a temporary suspension of the employee’s employment where the employer is unable to afford its employees, due to lack of revenue coming in. In such an instance, an employee remains on the employer’s payroll, however the employer does not pay the employee and the employee will render no services for a set period of time. This allows the employer temporary relief, whilst the employees who have been temporarily laid off (not retrenched), as a result of a temporary closure or total closure of the company for 3 months or less, as a result of COVID-19, are entitled to TERS for a period of 3 months. Alternatively, ordinary UIF benefits remain applicable. The option to lay-off may be provided in an employee’s employment agreement or bargaining council agreements, alternatively the parties may agree to same under a consensus seeking process.
TRAINING LAY-OFF SCHEME The Training Layoff Scheme, which allows a company in financial distress to suspend the employment relationship for up to 6 months whilst employees go on a skills training program is a further way to avoid retrenchments. For this period, the employer only pays the employee’s basic social security contributions, such as UIF, death/disability cover and pension/provident funds, whilst 75% of the employees’ salary is paid as a training allowance by the scheme.
UTILIZATION OF LEAVE Employers can require that employees take annual leave, unpaid leave, to go into negative leave or grant them special leave, if the employer can afford to grant such an indulgence. Unless written agreement to the contrary exists, an employer is entitled to determine the time at which annual leave may be taken by an employee. The parties may also agree, through a consensus seeking process, that the employee takes annual leave during the period of lockdown. Such an alternative allows an employee to utilize annual leave, rather than face the prospects of not being remunerated during a period of lay-off.
SHORT TIME Short time entails the reduction of the working hours of an employee, with a corresponding decrease in the employee’s remuneration. In terms of Sec 1B of the Unemployment Insurance Act 61 of 2001, a contributor employed in any sector who loses his or her income due to reduced working time, despite still being employed, is entitled to benefits if the contributor’s total income falls below the benefit level that the contributor would have received if he or she had become wholly unemployed, subject to that contributor having enough credits. An employee may also lodge a TERS claim where there has been a loss of income related to COVID-19, provided TERS remains available.
If the employee’s contract of employment does not make provision for short time work, then the employer must first consult with employees in respect of short time work and an agreement must be reached between the parties in this regard. If no agreement is reached and an employer unilaterally enforces short time work on its employees, this unilateral act could result in a labour dispute and claim against the employer relating to what is called a unilateral change to the terms and conditions of employment.
To ensure that short time is applied fairly, reduced hours should be allowed for everyone, where possible, as opposed to only certain employees working reduced time and others not working. It must also be done in terms of objective criteria.
VACANCY BUMPING Bumping is based on the LIFO (last in first out) principle, which is a selection criterion that rewards employees who have served the employer for a longer period of time. Depending on the circumstances of a case, bumping can take the form of vertical displacement or horizontal displacement. Vertical bumping means that the employee is transferred to a position with a less favourable status, conditions of service and pay. Horizontal bumping means that the employee is transferred to a position of similar status, conditions of service and pay. An employer should first attempt to bump employees horizontally before bumping them vertically. If the employer does not “bump” existing employees into other positions as part of the retrenchment process, the Court may find that fair selection criteria were not applied and that the retrenchment process was procedurally unfair.
FUTURE RE-EMPLOYMENT In certain circumstances, retrenchment is unavoidable. The employer may, when implementing a retrenchment, agree with the employee that should a suitable vacancy arise in the future, the employee will be invited to apply for such a position. Such an agreement leaves the employer with a possibility of re-employing skilled and experienced staff at a later stage. Employees may be entitled to claim UIF benefits following retrenchment.
A failure to show a genuine need or rationale for retrenchment, or a failure to properly consider alternatives, could result in the retrenchments being found to be unfair and the reinstatement of the employees with full back pay.
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