Webinar reveals how to handle retrenchments the right way

Companies should be restructuring quickly and with empathy to ensure sustainability post-Covid. 

On Wednesday morning, 29 July, CHRO South Africa hosted a webinar that looked at the challenges HR leaders face when their organisations take the tough decision to retrench workers, especially during the Covid-19 crisis. 

“According to the National Income Dynamics Coronavirus Rapid Mobile Survey, approximately three million people have lost their jobs due to the economic decline as a result of Covid-19,” CHRO South Africa managing editor Sungula Nkabinda said. “This represents an 18 percent decline in employment from 17 million people employed in February to 14 million people employed in April 2020.”

He then introduced Baker McKenzie’s Employment Practice Group head Johan Botes, who provided some context around the legislative environment both locally and abroad when it comes to the way companies are responding to the pandemic. 

“Prior to the pandemic, South Africa had an official unemployment rate of 27 percent,” Johan said. “It has since gone up to 31 percent, with the Minister of Labour predicting a jump to 45 percent at the end of the pandemic, unless we do something dramatic.” 

However, he pointed out that, while there are concerns about protecting jobs, businesses are also faced with protecting and positioning their companies in a way that they are able to survive the pandemic.

“Businesses are looking at restructuring their organisations in light of what’s happening around them,” he said. “Many are coming to the conclusion that they don’t need the same headcount as they had before the pandemic.”

From a legal perspective, Johan said that South African law does not prohibit staff redundancies during the lockdown and Covid-19 period. “An employer can still legitimately, lawfully and fairly, terminate staff because of redundancies or operational requirements.”

However, employers do have a duty to consider all alternatives short of termination when it makes staff redundant, like the availability of government funding that has been made available. 

Sungula then played a video interview with National Union of Mineworkers president Joseph Montisetse, who has been dealing with companies initiating Section 189A processes of retrenching employees en masse, as well as continuing negotiations around salary increases.

“We are currently engaging with several companies in the diamond and coal industries regarding salary increases in compliance with the Labour Relations Act,” he said. However, the union has been getting pushback from the companies within this industry, saying that their cash flows and revenues have been under pressure due to Covid-19. “But, as a trade union, our main objective is to ensure our members are getting what they are due and we do not budge.” 

The guidelines of a restructuring process

Joseph advised that, when engaging with unions like NUM around retrenchments, companies should be transparent. 

Sungula then introduced Mercedes-Benz South Africa executive director of HR Abey Kgotle, who said that, in any restructuring exercise, you will have different interests from the various parties you engage with. 

“You have unions, whose primary interest is securing the livelihood and jobs of their members. In mining, for example, you have the DMR, which assists unions in their processes. You also have the community, because most of the mines operate within spaces where there is a very close interface with the communities,” he explained. 

Abey added that the crux of any restructuring exercise is to find a way to balance all these separate interests and to get everyone to appreciate why it’s critical to undertake the exercise and how to minimise its impact. 

He echoed Joseph’s advice that transparency is critical during restructuring exercises. “Being transparent about the challenges you are facing makes it easier for people to understand where you are coming from and why it is so crucial for you to undertake the restructuring process.” 

He stressed that it is important to have an open mind when going through a restructuring process, because the more you engage with the different parties involved, the easier it is to find a solution that you might not have thought of. 

“With South Africa having all these structural problems, it also becomes critical for your business to play a part in helping to resolve some of these challenges, as they can have an impact on the sustainability of your business.”

Impact of retrenching 

Johan said that one of the things leaders of organisations often don’t think about is the intangible effect of redundancy and restructuring on the staff that are left behind. 

“Research has shown that 76 percent of the staff that remain behind said that they were less productive following such an exercise,” he said. “The psychological impact is very difficult to show on a spreadsheet.”

He explained that organisations who have gone through this process usually see an increase in absenteeism and presenteeism as employees are less motivated and aren’t as loyal as they used to be.

Abey concluded that, when companies are considering restructuring, they need to ensure that they do it quickly and with empathy and ensure the safety and wellbeing of the employees that are left behind, as you will need them to help you carry the business through the restructuring.