Retrenchment Procedures amidst COVID-19

Amidst the outbreak of the global pandemic of COVID-19, some employers have had to reduce the size of businesses or to shut down operations.

This necessitates the loss of jobs. However, the presence of this crisis does not exonerate employers from complying with the

requirements of the law on procedures of termination of employment due to operational requirements.  The Employment and

Labour Relations Act No 4/2004 and the Code of Good Practice, GN No.42/2007 has categorically provided the procedures

to be followed when terminating employment for reason of operational requirements. Termination by reason of operational

requirements is commonly known as retrenchment or redundancy. It is the termination of employment solely due to the operations

of the employer and not due to any reason caused by the employee. (Section 38, ELRA).

The law provides three major reasons which may entitle an employer to carry on retrenchment.

These are:

  1. Economic reasons
  2. Technological reasons
  3. Structural reasons

As soon as the retrenchment is contemplated, the employer is required to give notice to the employees.

The notice has to explain the reason lead to retrenchment. 
This notice goes out to:
(a ) Any recognized trade Union 
(b) Any registered trade union with    members in the workplace not represented by a recognized trade Union
(c ) Any employees not represented by a recognized or registered trade union (Section 38 (1) (d) ELRA)


Important aspects to consider when contemplating retrenchment:

(a) Reasons for retrenchment
These must be as according to the law and must be genuine so as to be understandable to the employees.

(b) Consultation
The law requires consultation to be done with the employees and/or Trade Unions. This has to be done effectively

and in a transparent manner so as to have a smooth transition.

( c ) Selection criteria
The selection of employees who will have to be retrenched has to be clear and transparent. The law proposes criteria

such as Last In First Out (LIFO), First In First Out (FIFO), the need to retain key jobs, experience or special skills,

affirmative action and qualification.

(d) The retrenchment benefits/entitlements
The retrenchment package must be discussed during consultation meetings. Employer’s policy or Collective Bargaining Agreement

may provide for the retrenchment   package, However, in the absence Employer’s policy or Collective Bargaining Agreement,

Section 44 of ELRA provides for payments on termination as follows: 
(a) Any remuneration for work done before termination;
(b) Any annual leave pay due or accrued;
(c ) Any annual leave pay accrued;
(d) Any notice pay due;
(e ) Any Severance Pay;
( f ) Any transport allowances.