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Pioneer Foods to retrench more than 1,000 employees - here's what you must know when choosing employees to retrench

by , 14 October 2013
Food production giant, Pioneer Foods is retrenching. According to an Eye Witness News report, more than 1,200 of the company's top earners will be put on early retirement, retrenched or re-deployed to vacant positions for a lower salary. Pioneer Foods says reducing its wage bill by restructuring is the only way to expand its profit margins. Chances are the food giant will now be faced with the difficult task of selecting employees to be retrenched. Here's what you must consider if you find yourself in a similar situation.

According to Eye Witness News, the South African Chamber of Commerce and Industry (SACCI) says several top companies have embarked on retrenchment drives in a bid to save their bottom lines.

SACCI's CEO Neren Rau is quoted as saying 'we're also aware of a number of other companies that are also retrenching at senior levels within our membership. This is a sign of the enormous pressure the challenging economic environment is placing on business.'

He added 'there were more retrenchments to come.'

This means more companies will face the task of choosing employees to retrench. And as the tough economic conditions continue, your company isn't exempt from this.

Use this criteria when selecting employees to retrench

The standard and most objective selection criteria that's been used for years is 'last in first out' (LIFO). This means employees with the shortest service are the first to be selected for retrenchment.

The Labour Law for Managers Loose Leaf Service explains that in today's competitive business environment and with employment equity, it doesn't always make sense to retrench employees with the shortest service.

For instance, you may find, that applying LIFO will impact adversely on your employment equity statistics. Or you may have just recently hired a new sales person that's going to play an important part in keeping your business afloat.

The good news is that South African courts tend to recognise these business realities and will allow you, as an employer, to depart from LIFO. As long as the criteria you use is still fair and reasonably objective.

Remember, your retrenchments must be substantively and procedurally fair.

This means the reason for the dismissal must be fair and valid and dismissal must be carried out in a fair way.

The Labour Law for Managers Loose Leaf Service recommends you make specific provision in your employment equity or affirmative action policy for the retention of people from designated groups in the event of a retrenchment exercise.

And if you want to use poor performance as a selection criteria, you must have all the documents to back it up (performance appraisals).

Remember, you need to have a good reason to retrench and you need to do it properly. If you don't, your employees can take you to the Labour Court. And defending a retrenchment case in court will cost you time and money. You may even end up in a worse financial position despite the savings you achieved by reducing staff.

So be sure to take these considerations into account when selecting employees to retrench.

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