Page 17 - KZN Business Sense 3.4

KZN

KwaZulu-Natal
Business Chambers Council
RETRENCHMENT IN TERMS OF SECTION 189A OF THE LABOUR

RELATIONS ACT 66 of 1995

Nikita Pillay - consultation with the eected been retrenched for the last 12 less than four years, one may in rst out’ (LIFO) principle.
DRG employees in order to comply with months. claim for one day for every six
Outsourcing the fairness requirement. days whereas if one’s contributions e Code requires that the oer
HR & IR If the information on the notice are more than four year’s one may
Consultant of future re-employment in the
Consultation is insucient, the consulting can claim for a period of up to 238 event a suitable position becomes
An employer is obliged to employees may request the days. e maximum payout does available be raised as part of the
consult with its employees when it employer to disclose more not exceed 58% of one’s daily consultation process.
contemplates dismissing one or information. For example, the earnings.
more of the employees for employees may request the e Code reects on the
operational reasons. An employer employer’s audited nancial Code of Good Practice on minimum severance pay and
may not assume that an employee statements, where the reason for Dismissal Based on Operational points out that an employee may
will accept redeployment or the proposed retrenchment is for requirements not be entitled to severance pay if
cutting costs.
transfer within the company
D unless the employee is Selection criteria Whilst applying the the employee refuses a reasonable
alternative oer of employment.
contractually obliged to do so.
formulations of the statutory
Reasonable alternatives according
ismissal
of employees that is based on the An employer is required to An employer ought in most provisions, employers should keep to the code, is rstly the
a watchful eye on the guidelines
cases to apply the selection criteria
operational requirements of the provide its employees with a of last in rst out ("LIFO") subject provided in the Code of Good reasonableness of the oer and
employer is regulated by Sections statutory notice in terms of to skills, qualications and Practice on Dismissal Based on factors such as pay, job security
189 and 189A of the Labour section 189 (3) of the LRA which experience. It is the obligation of Operational Requirements, as and status and secondly the
Relations Act 66 of 1995 (LRA). A discloses in writing all relevant the employer to try and place briey outlined: employee’s personal circumstances.
Code of Good Practice has also information relating to the potentially aected employees in
been issued in terms of the LRA to proposed retrenchment prior to the proposed new structure – on e Code recognises the right of Training Lay-o Scheme as
govern the retrenchment process commencing the consultation no account should existing an employer to dismiss (retrench) alternative to retrenchment
to be followed by an employer. process. An employer must employees be treated as applicants employees if the reason is based
consult not only on the for employment. on economical, technological, According to the Department of
Dismissals based on the consequences of the proposed structural or similar needs. Labour, the Training Layo
employer’s operational retrenchment but in respect of the Severance pay Scheme was introduced and
requirements are more commonly business needs and to be able to An employer is required to e code further recognise that presented to the public in
known as retrenchments. Two show that all reasonable consult with potentially aected retrenchment is categorised, as a ‘response to the international
types of retrenchment processes alternatives have been considered employees on what a reasonable ‘no fault’ dismissal i.e. the economic crisis’ to the way that
are distinguishable; small scale prior to contemplating the need severance package ought to be. employee is not responsible for the South Africa should respond to
retrenchments and large scale for retrenchment. Many employers have policies and termination of employment. the economic challenges.
retrenchments. Small scale past practices in this regard. e
retrenchments are regulated by An employer must thereaer severance package cannot be less e Code places an onus on the e scheme acknowledged the
section 189 of the LRA, while engage in meaningful consultation than one week's remuneration employer to explore alternatives to importance of training and skills
large scale retrenchments are with its employees or their from each completed year of dismissals and further that the development and introduced it as
regulated by section 189A of the representatives to achieve service. An employee would also employees aected by follows:
LRA consensus. Meaningful be entitled to notice pay in retrenchment are treated fairly.
consultation requires the employer addition. Training and skills development
When a company considers to allow the employee or its Both procedural and substantive need to be prioritised, quality
retrenchment, procedure must be representatives an opportunity Many employers, particularly in obligations are placed on the improved and the learnership
followed in order to comply with during consultation to make smaller retrenchments, are employer according to the Code. programmes enhanced. In
the Labour Relations Act in representations about any matter prepared to make an additional ex addition to other measures to
respect of the retrenchment of any connected with the proposed gratia payment to an employee in e Code highlights that the
member of sta. retrenchment and for the full and nal settlement of all purpose of consultation is to avoid retrenchment, one further
employer to respond. claims relating to the employee’s participate in a joint consensus option that the parties will
e retrenchment process termination of employment to seeking exercise, to reach consider is training layos,
normally consists of two e Notice which is given in obtain nality and to avoid the agreement if possible and for the nanced by the National Skills
important stages: terms of Section 189(3) costs and time involved in process to commence as soon as Fund (NSF) and Sector Education
e employer must give notice litigation. possible. and Training Authorities (SETAs),
1. e decision by the employer to the aected employees of the for workers whose employers
that costs need to be reduced by need for the proposed Tax directives Further guidelines are that the would ordinarily retrench them
means of retrenchment of sta retrenchment. is notice must be e employer must submit a tax employer must disclose all and which can be introduced on
(the economic rationale) in writing and contain the directive application to SARS relevant information, that the terms that would keep them in
2. Deciding on the best way to necessary information for the before the lump sum amount is topics for consultation provided in employment during the economic
eect retrenchments to ensure consulting employees to make paid to the employee. e S 189(3) should not be a closed list downturn, but re-skill them as an
that the process is fair. representations at the employer will apply for a tax and that the employer should keep investment for the future
consultation. directive by lling in an IRP3(a) an open mind on any viable economic recovery.
It is important that both form, and sending it to SARS. alternative proposals.
employers and employees e necessary information Upon receipt of this form, SARS Any agreement to participate in
understand the requirements of includes, but is not limited to: will work out the correct amount e guidelines in the Code the scheme will be facilitated and
the Labour Relations Act and how • reasons for the proposed of employees’ tax that the claries that the period of overseen by the CCMA and
employees’ rights are protected. retrenchment employer must withhold on the consultation is not prescribed but ultimately approved by the
All employees (and their • options considered by the severance benet, and the that the consultation process Department of Labour.
employers) involved in a employer to avoid the proposed employee will receive that benet should at least provide for an
retrenchment should at least be retrenchment and the reasons net of tax from the employer. e opportunity to meet and report Nikita Pillay is employed at DRG as a
aware of the following: for rejecting these options employer will issue the employee back to employees, to meet with Human Resource Generalist, accompanied
by experience in Industrial Relations. Her
• number of employees likely to with an IRP5 tax certicate the employer and request, receive key focus is Labour Law compliance, and
When management decides to be aected and their positions reecting the gross amount of the and consider information. providing advice and guidance in this
reduce costs by retrenching sta, • proposed selection criteria for benet and the employees’ tax that respect.
the employer must rstly seek selecting employees for was deducted. e employee will Urgency of the retrenchments T: 031 767 0625
avenues to minimise retrenchment need to declare this in his annual should not hinder proper C: 073 366 8377
retrenchment. is could include • time when the retrenchment is income tax return. consultations, however the Code nikita@drg.co.za
for example requesting employees likely to take eect recognises that the process may www.drg.co.za
to work short time, eliminate • proposed severance pay UIF claim process for retrenched become more truncated.
overtime, or impose a timeous • any assistance that the employer individuals
moratorium on appointing new proposes to oer the employees Retrenched individuals who e Code further provides
sta, transfers, etc. An employer who are retrenched have been contributing to detailed guidelines on the
cannot simply make a unilateral • possibility of future employment Unemployment Insurance Fund selection of employees that may be
decision and announce that short of the employees who may be (UIF) may claim for retrenched. Fair selection criteria
time is going to be worked with retrenched unemployment benets. according to the Code include
immediate eect to avoid • number of employees of the length of service, skills and
retrenchment. Such a decision employer; and/or e amount of money that can qualications. e general neutral
must be as a result of a process of • number of employees that have be claimed: If one has worked for selection test however is the ‘last

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