HR Unplugged - Retrenchment during Covid Pandemic

Some considerations before retrenching during the COVID pandemic

We are all fatigued by the pandemic; and the impact will be felt for many months and years to come. There is no crystal ball to tell us when the economy will recover.  I have been asked the question: how do we retrench some of our employees?

Before considering retrenchment, we need to look at the potential impacts and think through some of the alternatives;

  • You could potentially lose really good people.
  • There would be significant damage to the trust between yourself and the rest of the team and a negative impact on morale.
  • To sustain productivity, your remaining employees would need to continue being motivated and passionate about the business.
  • As a business owner you need to survive while being mindful of the responsibility you have to your employees.
  • Treating your employees with respect and fairness is critical.
  • Retrenchment should be the absolute last resort.

First and foremost, consider the following:

  • Review all employee and payroll costs e.g. parking, canteen allowances, any non-essential bells and whistles. Every bit helps. Be creative. Be inclusive and allow staff to come up with creative suggestions and ideas.
  • Working from home options could reduce office / operational costs e.g. rent, electricity, consumables.
  • Working from home would reduce travelling time and transport costs for employees. As a trade- off, employees should be willing to consider taking a pay cut to offset the travelling costs to work. While this is a challenging concept for many to accept, if handled with transparency and sensitivity, it can be achieved.
  • Review your product or service offering and consider how you can pivot / redesign / strategise to capitalise on new opportunities and adapt to the new way of doing business.
  • Use technology where you can and review sourcing, production, and distribution costs.
  • Apply for temporary relief funds for SMME’s.
  • Implement a Short time strategy: Work a 3-day versus a 5-day week.
  • Consider Job sharing: Sharing one salary and hours between two employees.
  • Temporary layoffs: A temporary layoff results in a no work no pay scenario where the employment contract is suspended and not terminated.
  • Salary reductions result in a pay cut but the employees continue to work full time.
  • Suspend the issuing of bonuses or increases.
  • Grant unpaid or paid leave
  • Offer voluntary severance. A short-term cost for a longer-term gain.

It is important to note that changing terms and conditions of employment will require consultation and consent from the employees. Consultations can be done prior to a Section 189 retrenchment process commencing, or during the retrenchment process, as an alternative to retrenchment. Either way a consultation needs to take place and an agreement reached. If agreement is not reached, then the following needs to be considered when retrenching employees:

  • There must be a valid reason for the retrenchment i.e. economic reasons, and not because employees refused to agree on changing the terms and conditions of employment.
  • Be careful of using the COVID pandemic as an excuse to retrench employees.
  • Ensure that you follow the retrenchment procedure carefully.
  • Ensure that the separation is managed with empathy and emotional support is provided as it can be a very traumatic process for an employee, especially during this time.
  • Ensure that you do not discriminate against anyone, especially vulnerable or ill employees who are unable to work from the office or from home.

As the economy slowly opens, businesses need to consider all the options available to them to stay in operation and protect their reputation and brand. This requires businesses to, not only, be compliant with the Labour, Health and Safety and other relevant directives and legislation, but to implement the changes in a fair and compassionate manner.