Retrenchment?

The importance of preparing your company to downsize

In the current economic climate, it has become increasingly necessary for many companies to start taking a hard look at their operational costs and find ways of maximizing productivity while minimizing expenditure. The fact that labour costs ordinarily constitute the lion’s share of a business’ expenses makes it the first target for penny-pinching managers and often times this will result in a management decision to reduce the workforce as a “quick-fix” to rebalance the books. The problem with this approach, however is that managers fail to grasp the legal complexities of a “Retrenchment” process, or Dismissals for Operational Requirements as it is legally known. Not only are there very specific procedural requirements which a company must adhere to, but there also exists a single major cost implication which could, in many cases make the decision to downsize less attractive to management who are seeking interim short term relief to budgetary pressures. Additionally, failing to prepare for the massive expense of such dismissals may very well turn out to be the final nail in the coffin of small businesses. Sections 189 and 189A of the LRA (Labour Relations Act 66 of 1995 as amended) provide the outlines of the procedure that must be followed and Section 189A(13)(c) allows the Labour Court to reinstate* employees who were dismissed without such procedure. Read more “Retrenchment?” →