Considering retrenching staff due to COVID-19

04 August 2020 10:00

Considering retrenching staff due to COVID-19? Here are 15 alternatives

Despite the business challenges presented by the COVID-19 crisis, considering alternatives to retrenchment may have a positive impact, not only on your employees, but on your business in the long run – enabling you to preserve your workforce rather than losing valuable members of staff.           

“While employers may be struggling to keep their normal operations going and are facing financial distress due to the COVID-19 pandemic and the extended national lockdown, retrenchments must be considered as an absolute last resort, particularly in a country like South Africa where the unemployment rate and economy are already a concern,” says Gcobisa Ntshona, Human Resources Director at LexisNexis South Africa.

The government’s R500 billion recovery and stimulus package provided some relief, however, there have been delays recently in the issuing of the COVID-19 TERS scheme which assists employers to avoid retrenchment. Furthermore, the scheme is expected to end in June.

To add to the woes, South Africa’s unemployment rate is expected to worsen from 29 - 35%, with young people among the hardest hit and youth unemployment currently at 40.

Despite this dire outlook, all is certainly not lost. Organisations do have other options to consider as alternatives to retrenchments, provided these are procedurally and substantively fair as guided by the Labour Relations Act.

Labour law solutions such as Lexis Practical Guidance, with practice areas in Labour and Labour Public Sector, are helpful in providing the expert commentary, how-to resources and necessary toolkits required to navigate this uncharted territory and stay abreast of best practices on all labour related matters.

Here, Ntshona rounds up a few of these options, as recommended by LexisNexis expert partners:

Robin Gerhold, Partner, Gerhold and van Wyk Attorneys and Conveyancers, proposes these alternatives to retrenchment:

  1. Remote working and flexible working arrangements – particularly allowing employees to work from home, when possible to do so.
  2. Lay-offs – temporarily suspending the work of an employee, where provided for in an employee’s employment agreement, bargaining council agreements, or through a consensus seeking process, enabling the employer to enjoy temporary relief from remuneration obligations, while the employees may be entitled to receive benefits from the Unemployment Insurance Fund.
  3. Future re-Employment – of skilled and experienced staff at a later stage, should a suitable vacancy arise in the future.
  4. Use of annual leave – consensually agreed, unless written agreement to the contrary exists, allowing an employee to use up their annual leave, rather than face the prospects of not being remunerated during a period of lay-off.
  5. Other alternatives – consensually agreed to between the employer and employees.

    Kayla Shadiack, Senior Associate and head of the Labour Law Department at Christodoulou & Mavrikis Inc, recommends:

  6. Demotion – through a letter from employer to employee stating that he/she has been demoted due to any or all of the following: a reduction in the employee’s pay or responsibilities; removal of the employee’s subordinates; a requirement for the employee to now report to someone who used to report to him/her; and/or the transfer of an employee acting temporarily in one position back to his/her old position.
  7. Flexi/remote working, unpaid leave or sick leave - if the employee is sick or has travelled to an at risk area.

    Mike Beaumont, founder and author of Beaumont’s Service, published by LexisNexis, offers the following collaborative ideas to avoid retrenchments:

  8. Find common ground – between the primary concerns of the employer (such as cash flow, supply chain sustainability, and employee agility, productivity, reliability, retention and development) and the employee (such as community pride and stability, physical and emotional wellness, fear and stress, confidence levels, debt, job losses and deaths).
  9. Cut other costs - hold fixed costs, such as implementing wage freezes and reducing salaries and allowances, and cut variable expenses such as expensive overtime and weekend rates.

  10. Introduced short /staggered working weeks – including job sharing
  11. Manage leave – implement compulsory leave during short weeks, leave to reduce inventories, and encourage the use of high leave credits
  12. Increase learnerships – which offertax breaks, especially youth learnerships
  13. Skills development - training lay-off schemes, increased learnerships, using all tax breaks, directing retrenchees to skills upliftment
  14. Voluntary Severance Packages – explorea mutual settlement in which the employee must be capacitated to accept this as a binding contract in which they waive due process.
  15. Business Rescue – as an alternative to liquidation of a struggling company, through which employment continues as is subject to formulation of a rescue plan by the Business Rescue Practitioner.

Says Ntshona, “The COVID-19 pandemic and lockdown does not need to mean the end for businesses and professionals.”

“While businesses will be required to make difficult choices in the period ahead, having insight into the alternatives and the relevant legislation will help to ease the burden somewhat and can ensure business continuity without the need to sacrifice staff,” she concludes.

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