Follow these two guidelines when selecting employees to retrench
Retrenchment is a sensitive issue and you have to handle it with care.
What makes it a sensitive matter is that you're ending your employment relationship with your employees not because they've done something wrong, but you're ending it due to operational reasons.
You're essentially forced to cut ties with people who've been with you through the good and bad times as you were building your business.
So how do you even begin to select people to retrench in this situation?
We recommend you follow these two guidelines when selecting employees to retrench so you can comply with the Labour Relations Act (LRA) and avoid disputes.
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Two guidelines to follow when selecting employees to retrench
#1: The LRA says you must use a selection criterion that's fair and objective.
#2: The standard and most objective selection criterion that's been used for years is 'Last In First Out' (LIFO). It means that the employees with the shortest service are the first you'll select for retrenchment.
But, in today's competitive business environment and with employment equity, it doesn't always make sense to retrench employees with the shortest service.
In some instances, applying LIFO could have a negative impact on your employment equity statistics. And if, for example, you just hired a new sales person that's going to play an important part in keeping your business afloat, applying LIFO wouldn't be logical.
The good news is our courts recognise these business realities and they now allow you, as an employer, to depart from LIFO as long as the criteria you use is still fair and reasonably objective.
The bottom line: When it comes to retrenchments, your selection criteria must be fair and objective. So follow the guidelines we've given you so you can comply with the LRA and avoid disputes.