Preparing for retrenchment

preparing for retrenchment
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No one wants to consider that they will ever be retrenched. But, the reality is that as the country’s economy struggles, retrenchments are becoming more commonplace. Gugulethu Mhlungu finds out what your rights are, and how to prepare for this possibility.

From mining to media companies, news of thousands of jobs being at risk of retrenchment have become commonplace. This is because companies are feeling the pinch in a stagnant economy. According to the International Monetary Fund predictions, the economy is forecast to grow at just over 1% this year, following a 0.8% growth in 2018. But in order to create jobs, it needs 6% or more annual growth. “The South African economy is not doing well at all, which means business and households aren’t doing well. So, companies are taking extreme measures just to stay afloat,” says economist Thulani Jojwana. The numbers of job losses are staggering as seen in Statistics SA’s Quarterly Labour Survey. It showed that the economy shed just over 200 000 jobs in the first quarter of 2019. “Essentially only government is hiring at this point, which is a scary time for workers,” Thulani says. Maggie Ndaba, a senior Human Resources professional for over 20 years, was retrenched earlier this year and completely unprepared for it. “We had been retrenching in other departments and I knew things were bad. But, having been with the company for over 15 years, I had thought that I would survive the latest round of cuts. Then I got retrenched.” Maggie had also thought she was safe because of the “last in, first out” policy that is often applied. This means the last people employed are the first to be retrenched. But, (as was in her company’s case, and as she was told) companies may decide to retrench specific departments they no longer need. This can include long-serving staff members, workers from departments that have more staff than needed or be based on whether you have the skills the company needs to continue operating.

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How retrenchment works

Because of the huge impact it can have, especially in an economy with high poverty and unemployment levels such as SA, retrenchment is a complicated and lengthy process. And, companies need to approach it with great care, says Zimasa Qolohle Mabuse, head of legal for a fintech company and founder of the Corporate Canvas – a magazine for young professionals. According to the basic guide to retrenchments, published on the Department of Labour’s website, employers must consider alternatives to retrenchment, consult all the relevant parties when considering it, and if unavoidable, fair procedures must be followed. Zimasa explains that the most critical step is that the process needs to be procedurally and substantively fair throughout. “Substantively fair means the company needs to give substantive reason for the retrenchments. So, it would explain, for instance, that given the economic or industry conditions, the business has embarked on a cost-saving exercise that has resulted in retrenchments. It would also need to explain the alternatives that were considered, and explain why they were rejected or weren’t enough to deal with financial or operational issues.” Part of the procedurally fair process, in terms of section 189(3) of the Labour Relations Act, is to inform all workers, whether or not they will ultimately be affected, that the company is considering retrenchment. Precious Simelane* found herself jobless overnight in 2018 when the media start-up she worked at shut down. “We were sent an SMS one morning and told not to come to work. We didn’t even get our salaries for that month. I had to ask my family for a loan in order to get through the rest of the month and while we were fighting the company at the CCMA,” she recalls. Zimasa says companies that do not adhere to the Labour Relations Act in their retrenchment process can find themselves at the CCMA. So, it does not serve a company to rush the process and get it wrong because that could end up costing more. Consultation is a key part of the retrenchment process. And, in addition to reasons and numbers of staff affected, other information to be shared is letting employees know about what form their severance pay will take, the assistance the company will offer (such as offering time off to attend interviews or assistance in finding work in other parts of the business) and the possibility of future re-employment. Zimasa stresses that you will receive many documents during the process. “It is important to read and keep all those documents, especially if in the future you need to provide evidence that you were indeed retrenched.”

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 How to prepare

While the prospect of losing your job is scary, both Thulani and Zimasa say it would be naïve to pretend that the risk of retrenchment isn’t real in current economic conditions. Thulani says even “safer” sectors such as finance, which have traditionally done well at creating jobs, are having to consider retrenchments. Two of the big five banks have announced that they would be embarking on retrenchment processes that could lead to 2 000 job losses. “Unless something drastic happens to jump-start the economy, more job losses are imminent. So, you need to unfortunately prepare. Part of that involves saving money, which unfortunately SA has very low levels of.” Income protector insurance policies are one example of preparing for the unexpected loss of your job, says Thulani. Zimasa agrees, saying sometimes you can tell when retrenchments are coming by looking at developments in the economy, your industry as well as cost-cutting measures in your own company. “You need to stay on top of this kind of information so you can begin preparing by either upskilling yourself and finding alternative or additional work. You constantly need to be looking at ways to improve your skills, and hopefully have the kind a company will want to retain even in tough times.”

Find the Labour Relations Act at