Topical Press ReleasesOctober 14, 2020

Manage retrenchment complexity, legally

Retrenchment is never easy, but it’s essential that organisations work to the letter of the law 

In the wake of an economically challenging year that has put businesses of all sizes under immense pressure, there has been a commensurate increase in the number of job losses. Companies have had to make hard choices around employees and their futures. Some companies have closed, some have cut staff so they can keep some jobs and the business open, others have had to juggle the different demands of salary and performance to find an unhappy balance in the middle. Unfortunately, amidst these hard decisions and financial challenges is another complex issue – retrenchment regulation.

“There is much that needs to be considered when looking at a Section 189 dismissal, or retrenchment,” says Nicol Myburgh Head: CRS Technologies HCM Business Unit. “Very specific conditions have to be met or employees could refer their case to the CCMA.”

The Commission for Conciliation, Mediation and Arbitration (CCMA) is focused on resolving disputes around the Labour Relations Act 66 of 1995 (LRA). As it is not under the control of any specific political party, trade union or business, the CCMA offers impartial guidance to employees and organisations and can even undertake large-scale retrenchments for companies that want to ensure their retrenchments follow the letter of the law. The CCMA provides a mediator and ensures that the process is fair and correct.

Retrenchment procedures

“The lockdown has made a fragile economy significantly worse and we’ve seen many companies fail, or struggle to push back from the edge,” says Myburgh. “Many are entering into retrenchment procedures now and the complexities can land them in even more difficult circumstances – the last thing they need when they’re closing their doors. It’s a good idea to work with an expert consultancy in this field who can help make the right decisions.”

For companies that want to bypass retrenchment entirely, they can look to some of the solutions implemented by organisations throughout the lockdown. Some have stopped paying their staff for a period to keep the company afloat – this is short-term measure that doesn’t necessarily work. Some companies have taken the risk and still gone into retrenchments.

“Some companies have decided to completely remove their overhead costs by shutting down the organisation completely and liquidating their assets, with plans to start a new company when the lockdown is over,” says Myburgh. “This has meant that they’ve had to go with widescale retrenchments, which requires careful compliance with regulation and the letter of the law.”

Retrenchment process is procedural

A significant percentage of the retrenchment process is procedural. Specific things have to happen in order for the process to be defined as above board. If there is even one element out of place, the business is considered to be procedurally unfair and the CCMA will grant an arbitration award to the employee. This is a risk, as employees often win these cases and the cost to company can be significant.

“To ensure that your organisation does this properly, your first step is to provide the employee with a Section 189 notice that informs them that the company is contemplating retrenchment,” says Myburgh. “This letter must include specific facts to ensure it is compliant. Thereafter a date for consultation must be set and each part of the process put in writing. There are also certain payment criteria that have to be met and notice periods to follow.

“It is certainly a minefield, but not an impossible one,” he concludes. “Get someone who specialises in this type of situation and do it properly. A specialist will have an in-depth understanding of the complexities around retrenchment and ensure that both your organisation and your people are fairly taken care of.”

CRS Technologies has worked closely with organisations to ensure that they follow the law when it comes to managing retrenchment. The company has also launched a downloadable retrenchment kit which can be purchased from the CRS Online Shop if companies want clear checklists, templates, guidelines and plans on how it should be done.

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