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Coronavirus and Staff Reductions

BY Wayne Bolton

The stringent but commendable measures announced by our President in South Africa last night (15 March 2020) have today resulted in a whole new set of challenges and threats for businesses, especially small businesses.

 

This article does not seek to provide a complete solution but rather to facilitate perspective.


I have received calls from clients asking how to handle the following situations:


1. A critical situation where the new measures have resulted in a substantial loss of business going forward. They are concerned they will not be able to carry the current cost structure in the business particularly salaries and will have to reduce the size of the operation or worse, close.


2. A situation necessitating the sending home of staff for an undefined period of time.


At the outset let me echo the President’s call to the nation that we need to demonstrate nation building and support at this time – especially of the more vulnerable sectors of our nation. Where possible, we should maintain the income of our staff, many of whom support extended families that are staring poverty in the face. The loss of income could be catastrophic for them. We should maintain perspective that the current crisis is temporary in nature.


However, the reality is that some businesses will not survive this crisis and will no longer be sustainable – some overnight.


There are many questions left unanswered and many “what ifs” face entrepreneurs at this juncture. The situation is still unfolding and my advice is therefore not to act rashly in dealing with the issue of staff retrenchments. Careful consideration needs to be given by all and this will include compromise by all parties to the employment relationship, including unions.


The common law position is simple: in an employment relationship, the employer has an obligation to provide employees with work, for which they are remunerated. However, in the current scenario many employers may no longer be able to provide work. This may ultimately justify the termination of the employment contract on the grounds of operational requirements (following proper consultations and a fair procedure in terms of S189 of the Labour Relations Act).


However, the purpose of this article is to encourage genuine and meaningful consideration of, and engagement on, ways to avoid the drastic step of retrenchment. This could include, inter alia:


1. Letting staff take annual leave due to them;


2. Agreement on a reduced income for a defined period with a concomitant reduction in hours/days;


3.Agreement on a period of unpaid short time (there may be temporary lay-off provisions applicable in Bargaining Council Main Agreements or other Collective Agreements or Employment Contracts);


The first option above will allow some “breathing space” for the business to assess the situation, especially given the current state of flux.


The prescribed consultation process with staff should commence at the point of “contemplation” of possible retrenchments.


Where retrenchment is unavoidable, a restructure or reorganisation of the business should obviously be conducted in such a way that as few people as possible are retrenched. This may result in remaining staff members taking on additional responsibility or workload.


The retrenchment agreement should include inter alia a “re-employment clause”, namely, that for a defined period (for example 3, 6 or 12 months) affected employees will be given the option of re-employment if and when the business allows for this.


Open communication and consultation with potentially affected parties is important but under the current situation all should work together in an effort to achieve the most favourable outcome for all.


After all, the situation is only temporary and should as far as possible, be treated as such.
 

 March 16, 2020
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Wayne Bolton

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   Great article   
Jeanne Alberts
March 16, 2020 01:16:58 PM

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