Procedure to be followed in retrenchment
Labour column Davies Ndumiso Sibanda
MANY employers think that they can unilaterally tell employees to go home through paying them three months’ salary as notice pay, this has resulted in a lot of litigation with the employers losing cases. The law on retrenchment does not give the employer the right to unilaterally terminate the contracts of employment but the law says where the employer can no-longer afford to keep an employee for whatever reason, he should follow retrenchment procedure as set out in the Labour Act.
There is misconception that all retrenchments are now three months’ notice which can be worked or not worked at the discretion of the employer and 1 months’ salary for every two years worked retrenchment package.
This minimum retrenchment package is only applicable in cases where the organisation is financially embarrassed and the package will not be available to an employer who is retrenching for reasons that are not related to hardships.
The mistake that many employers make is to call workers to a meeting and retrench them without following laid down procedure and usually after workers have finished the money, they come back to claim unfair dismissal.
This becomes even more complex where the separation agreement was poorly drafted and the employer clearly stated that it was retrenchment rather than mutual separation, the workers will have no valid claim against the employer but in cases where the employer stated it was retrenchment and never followed procedure, workers are likely to claim unfair dismissal.
Employers are advised to make a decision whether they are retrenching or mutually separating with the workers as there are times where either of the option is a better option.
For example, where the retrenchment package portion attracts a large amount of tax it is better to go the retrenchment route to benefit workers on the tax free portion, but where the tax is negligible, it is much cheaper to go for mutual separation where the retrenchment administrative costs are high.
In conclusion, employers need to seek expert advise before engaging in any termination related to retrenchment or mutual separation and make sure that the agreement is legally crafted to avoid problems into the future.