With a global economic downturn and persistent local macroeconomic and energy challenges afoot, employers are feeling the pressure of high input costs and are increasingly considering cost-cutting measures, including retrenchments.

However, given South Africa’s tremendously high unemployment rate and general socioeconomic sensitivity, retrenchments are not the ideal solution.

Lately, employers are pursuing alternative measures to cut down on salary bills such as quiet hiring, law firm Cliffe Dekker Hofmeyr employment lawyer Nadeem Mahomed says.

Quiet hiring involves the deliberate avoidance of hiring new full-time employees, and rather making use of existing skills and capacity within the organisation. It is becoming an increasingly favourable option, since it avoids future retrenchments, Mahomed adds.

Many existing contracts of employment make provision for an employee accepting that their employer may adjust their roles and work responsibilities, provided that they are qualified to take on such work.

When enhancing an employee’s job description, either by adding further duties or asking them to take on additional positions or projects, Mahomed emphasises the importance of mutually agreeing on these terms.

Once there is agreement, it is strongly recommended that the terms are put in writing as an addendum to the existing job description and/or employment agreement. If it is a temporary setup, employers must be clear on the timelines.

Mahomed explains that prior to requesting employees to take on additional responsibilities or transition into different roles, employers must undertake a gap analysis to determine whether employees have the necessary skills and capacity to take on the work.

There is, however, a human cost to quiet hiring, where the employer profits through significant cost savings at the expense of the employees’ free time and family responsibilities. Mahomed says employers must recognise that the additional load may be intolerable for employees or have an adverse effect on their job satisfaction and mental health.

He suggests that employers be clear about their expectations of employees when new duties are introduced, as well as about the accompanying increase in remuneration or other benefits that the new duties may offer.

If the employee earns below the statutory income threshold, the employer needs to be cognisant of the statutory regulation of working hours and overtime remuneration which may be relevant with an increased workload.

Moreover, the employer and employee will also have to agree on working conditions that may need to change. For example, employees that had hybrid working arrangements might need to fully migrate to the office.

MORE ALTERNATIVES

Sometimes retrenchments cannot be avoided entirely, but the severity can be reduced.

CDH employment law director Gillian Lumb says voluntary retrenchment is often posed as an alternative to outright retrenchments; however, there are some pitfalls that employers need to be cognisant of.

For example, CDH proposes that employers first assess, through a consultation process, how many people may put their hands up for voluntary retrenchment.

Once an offer is put out to employees, employers are bound by it, Lumb notes, pointing out that a challenge arises when long-serving, highly skilled employees take up the offer of a voluntary retrenchment package, which the employer would have preferred not to happen.

“Do not consider an offer-and-acceptance process, rather have employees apply and reserve the right to decline the application,” Lumb explains.

She adds that offering a favourable package is important, and advises that employers check what employees are entitled to, and give them over and above that. This will ensure a higher success rate of voluntary retrenchments and avoid deliberate retrenchments.

Lumb also recommends that employers never make a guarantee to employers about the tax implications of retrenchment packages, since the South African Revenue Service may have its own ideas about tax exemptions.

Ultimately, Lumb states, employers have to consider what is viable. If companies are experiencing financial challenges and have to reduce costs, keep in mind that retrenchments can drive up costs as well, in the form of losing skills and experience, and in the form of severance packages.

Placing a moratorium on appointing new employees in the company is another alternative, as well as not replacing people that are dismissed or retired.

Next, companies can do away with independent contractors and fixed-term employees. However, this requires an assessment of the legalities around it and what skills and capacities the company needs to remain viable.

Another alternative to retrenchments involves eliminating overtime costs, or introducing short-time, which involves shorter working hours.

Lumb highlights more options as encouraging early retirement, especially for employees that are at or over the retirement age, as well as placing people on unpaid leave, or temporary layoffs, as opposed to permanent layoffs, which ensures the comfort of not being retrenched despite experiencing the impact of no pay.

Employment lawyer Abigail Butcher points out that if retrenchments are unavoidable, it is important that employers follow the correct procedure to avoid legal action and unintended consequences for the organisation.

Section 189 of the Companies Act requires an employer to conduct meaningful consultation with parties such as the bargaining council, workplace forums, registered trade unions or individual persons, depending on what is relevant, to reach consensus on the method for selecting the employees to be dismissed.

An employer cannot decide on the criteria to use, without consulting the other parties. To the extent that the consultation on selection criteria does not result on consensus, it is then open to the employer to unilaterally decide on selection criteria to be used, provided that the employer shows that the criteria is fair and objective.

The generally accepted selection criterion according to the Commission for Conciliation, Mediation and Arbitration is the “last in, first out” principle, the length of service and skills and qualifications.

Employers may opt for a number of other criteria, for example, misconduct or personal circumstances, but the safer approach would be to arrive at these criteria by agreement with the relevant union or forum.

Responding to whether an employer is required to consider the alternatives to retrenchment, CDH says yes, lest the dismissals be found to be unfair.