Increased economic turmoil means that more companies are struggling to stay afloat. Many are also being forced to resort to retrenchment as a last option to cut costs. By retrenching people, businesses try to alleviate their financial burden.
What are the causes of retrenchment?
Common reasons for retrenchment include restructuring procedures, or as a result of employers changing operational requirements.
It’s worth noting that a company may only legally retrench its employees if it can prove that no reasonable alternatives are available. In addition, the Labour Relations Act 66 of 1995 sets out the retrenchment procedure that is legal and how it should be carried out.
Employees can take legal action if they believe that they have been unfairly dismissed.
What does the legal retrenchment process involve?
- Once a company considers retrenchment as a final option as a cost-cutting tool, they must issue a written notice to all employees that are being considered for retrenchment.
This notice must entail:
- The circumstances leading up to and reasons for the proposed retrenchment
- A comprehensive account of the alternatives that were considered by the employer as means of meeting changing operational needs and the reasons that these alternatives were rejected
- The size of the workforce likely to be affected
- The method used to select the employees who are facing retrenchment
- Provisional time at which the proposed retrenchment will come into effect
- Severance pay proposed as compensation and any further assistance that the company will provide
- Possibility for future employment of retrenched employees by the same employer
- The number of employees already retrenched by the employer, in the year leading up to the current retrenchment
- Relevant details (date, time and place) of consultations that will take place to allow employees to address their concerns
- Employers must consult with affected employees and/or their trade union representatives. Employees can suggest alternatives to retrenchment.
- Employers must consider these proposals carefully and provide feedback. They must provide reasons for their acceptance or rejection.
Retrenchment Cover:
There are companies that provide retrenchment insurance designed to provide financial support in the event of unforeseen retrenchment.