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Make sure you have 'fair reason' before you even start thinking about retrenching employees

by , 12 March 2013
Telkom is in trouble. It's offering voluntary severance and early retirement packages to thousands of its employees to cut costs and keep the company profitable. Maybe your company's facing a similar situation - and you too are considering companywide retrenchments. Before you start the process, make sure you have fair reason to do so...

'In a new bid to cut costs, Telkom on Monday announced a fresh round of retrenchments and early retirements, and warned that forced layoffs would follow if it did not meet its targets,' reports BD Live.

'The phone company said management and bargaining unit staff could apply for the package, but it did not specify how many staff it wanted off its books.'

Whether you're retrenching one employee or many, you need to know whether you have a good reason to retrench and how to go about doing it properly, warns the Labour Law for Managers Loose Leaf Service.

What does that mean?

Why fair reason is the most important part of any retrenchment process

Well, at a basic level a retrenchment is just like any other dismissal. And that means according to the Labour Relations Act, you must have two things: A fair and valid (i.e. good) reason to retrench and a fair procedure.

Get it right, and your retrenchment will be substantively and procedurally fair.

Get it wrong, and you'll be at risk of a case at the CCMA or the Labour Court. And if this happens, 'you could be ordered to take them back (reinstate them), with or without back pay, or to pay them compensation,' explains Labour Law for Managers Loose Leaf Service.

But what you may not realise is that the retrenchment process is quite different from other types of dismissal. After all, you don't have to hold a disciplinary hearing or a counselling session. All you need to do is follow a process of consultation.

But before you do that, you need to ensure you have a fair reason to retrench. So, always start with the reason and make sure you have a reason that is fair and valid – this checklist will help you.

How to check your company has fair reason for retrenching staff

The Labour Law for Managers Loose Leaf Service outlines ten questions your company must answer before you even start talking about retrenching staff. These are:

  1. What do you want to achieve by retrenching?
  2. What is the best plan to get there?
  3. Does your plan tie in with what you want to achieve?
  4. Do you have the facts and figures to back you up?
  5. Are your facts and figures accurate and can you substantiate them if they are queried?
  6. How many employees do you envisage retrenching? Does this make it a large-scale retrenchment? (If it does, consider the implications and time frames involved.)
  7. How do you propose selecting employees for retrenchment and does this make sense in line with your strategy?
  8. When do you want to implement retrenchments and why does this timing make business sense? Are you giving yourself enough time to consult properly?
  9. What do you propose paying as a retrenchment package? Have you worked out how much this would cost you?
  10. What other assistance would you be able to offer to retrenched employees?

Only once you've answered these questions can you ensure your decision makes good business sense. If it does, you're ready to start the process of retrenchment.

Bottom line: Retrenchments are never fun for a company to do. But they're even more stressful if an employee takes you to the CCMA for unfair labour practices. To ensure this doesn't happen to you, make sure you can prove retrenchment is the only business decision that makes sense.

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