JOHANNESBURG - Thousands of South Africans have been faced with retrenchment throughout last year.
This year, the trend of mass job losses does not seem to be letting up.
Sluggish economic growth and increasing costs are only adding to the woes of employees and employers alike.
Although times are tough, employers are still required to follow procedures when implementing retrenchments.
Labour law compliance is imperative as the unemployment rate in South Africa is very high and courts consequently take a stricter approach to non-compliant employers.
Courts see retrenchments as no-fault terminations, meaning the employee has not committed any fault but the business requires less employees, in order to increase profits or limit losses.
Employers are required to give fair reasons for retrenchments and follow procedures to make sure the decision is fair.
Should employees feel they have been unfairly retrenched, they may refer the dispute to the CCMA or a bargaining council within 30 days of the date of the retrenchment.
Should the case be referred to the CCMA, the employer will have to prove there is a valid reason for retrenching staff and they must prove the staff members chosen to be retrenched were chosen fairly.
Correct procedures are laid out in the Labour Relations Act and must be followed in good faith by employers.
The employer must prove they have shared all pertinent information with their staff or representatives. The employer must also prove they have consulted with the employees in good faith.
The consultation between the employees and employers begins with written notification of the proposed retrenchment and inviting consulting employees to discuss and come to a consensus.
Employees must be allowed to make representations about the proposed retrenchments and employers must respond to those representations, giving reasons if there are disagreements.
Fair and objective selection criteria must be used when selecting which employees are to be retrenched.
The consultation process allows for employees to suggest alternatives to the proposed retrenchments, for example, no new appointments, early retirements, voluntary retrenchment, adjusting work hours or no overtime.
Suggestions can also be made regarding the number of employees to be retrenched, the timeline of the proposed retrenchments, and ways to mitigate the retrenchment.
Severance pay for the retrenched employees is negotiated during the consultation process.
The Basic Conditions of Employment Act also provides guidance on what has to be included when calculating the severance package.
Employers are required by law to pay one week’s pay for each completed year of continued employment as severance pay, however, the employees may suggest a bigger amount.
Retrenchment packages are taxed in the same fashion as any money taken at retirement – the first R500,000 of your package is tax-free, the next R200,000 is taxed at 18 percent, the next R350,000 is taxed at 27 percent and anything over R1,050,000 is taxed at 36 percent.