Retrenchment may be the first thought that comes to mind for employers who are hard hit by Covid-19. However, in most cases rushing into the retrenchment process is not a good idea.
While the impact of Covid-19 on economic activity has been severe and will continue to cause harm for some time to come, there should be an improvement in the foreseeable future.
When employees are unable to tender their services due to Covid-19 restrictions, the employer does not have to pay them – they are automatically laid off without pay. As restrictions on movement and economic activity are being relaxed, employees are progressively able to tender their services. Employers may not be ready to resume business, though. Retrenchment may be justified, but it is not necessarily the best option.
It is at this juncture that the continued lay-off without pay can be a very useful alternative to retrenchment. It cannot be imposed, but has to be agreed.
Advantages of temporary lay-off
An agreement with employees regarding lay-off without pay would have the following advantages:
- The employer’s obligation to pay the employee may be suspended for an indefinite period
- The employer has time to assess the prospects of recovery and to do proper planning
- The employer may avoid having to pay out severance pay unnecessarily
- The employer may retain skills that might otherwise have been lost
- Employees are offered some sense of security
- Employees can benefit from C19TERS relief for up to 3 months
- There is the option to agree to reduced working time (short time) at a later stage
- If some employees are eventually retrenched, they can start claiming normal UIF benefits after exhausting the C19TERS relief (normal UIF benefits are not reduced because of benefits received in terms of C19TERS)
From the above it should be apparent that temporary lay-off without pay should be a sensible alternative for most employers and employees.
Nothing prevents the employer from retrenching at a later stage once it has a clearer perspective on where the business is heading. Retrenchment consultations can be held without the financial pressure of having to pay employees during that time.
The legal considerations surrounding temporary lay-off, reduced working time and retrenchment are covered in a previous article - see https://www.labourwise.co.za/labour-articles/employment-challenges-after-lockdown
Jan Truter for www.labourwise.co.za