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Retrenching staff for profit – who goes/who stays?

This post is also available in: Afrikaans

by Christo Bester, LWO Employers’ Organisation

All employers aim at making profit and to have a sustainable business. For that reason employers have to evaluate all factors continuously that may influence the long-term success of the business so that a cost-efficient environment can be created wherein the undertaking can continue functioning competitively in the market place.

In the present economic climate many employers have to consider various options to adapt to the changing environment.

Staff retrenchment means a “no-mistake” dismissal approach as the employee has done nothing wrong and the dismissal conforms to operational requirements. Similar to all dismissals, the staff, retrenchment process has to be fair substantively as well as procedurally. But how does the employer determine who stays and who goes?

In terms of Article 189(7) of the Labour Relations Act there are two recognised criteria that an employer can apply to determine which employees have to be retrenched in the process, namely:

• One on which the consulting parties agree; or

• One that is fair and objective.

In terms of Article 189(2) of the Labour Relations Act the employer and other consulting parties have a responsibility during the staff retrenchment process to become involved in a combined meaningful consensus-seeking action in an effort to reach an agreement on the method of determining selection criteria which will have to be applied to decide which employees will be retrenched. In an instance where consensus cannot be reached, the employer has to use his discretion in deciding on selection criteria unilaterally. However, the employer has to be able to prove that the criteria to be used are fair and objective. Traditionally employers and consulting parties tend to depend on the “last in, first out” principle, as it is generally accepted as selection criterion in terms of the Code of Good Practice for Operational Requirements of the Commission for Conciliation, Mediation and Arbitration (CCMA).

These criteria are associated with least risk although it is by no means the only fair and objective criterion. Employers and consulting parties often fail to consider other available fair and objective criteria, which may result in the CCMA finding that a fair selection criterion had not been employed and that the staff retrenchment process was consequently procedurally unfair.

There are various rulings where the Labour Court determined that the employer is entitled to employ a multi-grading selection criteria process such as:

• Years of employment (“last in, first out”);

• Qualifications and experience;

• Evaluation by a direct supervisor (including an analysis of factors such as commitment to the business and team objectives, teamwork and dependability, attendance, adaptability, initiative and career potential);

• Capability, efficiency, retention of key skills;

• Sustainable service delivery;

• Performance assessment and previous performance (or discipline)

• Stationing/Replacing/Transfer of unaffected personnel in different departments or branches of affected personnel (bumping);

• Voluntary separation package;

• Retirement package, and

• Re-development package.

As long as these criteria are applied fairly, consistently, objectively, distinctly and transparently in such a way that the process does not degenerate into dismissal as a result of misconduct, poor work performance or incompetence, the Labour Court refers to these criteria as “procedural safety measures”.

We strongly recommend that employers introduce explicit rules in the workplace and follow the correct procedure consistently in al labour matters, but especially when it comes to personnel reduction. It is a process which is very specifically described in legislation and holds serious consequences for employers should there not be kept 100% to the letter of the law.

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