Retrenchment Laws Changed
• Sec 12C to be binding even when retrenching one employee
• Minimum retrenchment set to one month salary for every two years served.
Retrenchment has grown its eminence across the divide but taken with mixed feelings; to employers it’s their scapegoat for their financial woes where as to employees it has become a malevolence they don’t want to even talk about. Basically retrenchment means terminating the employee’s employment for the purpose of reducing expenditure or costs, adapting to technological change, reorganizing the undertaking in which the employee is employed, or for similar reasons, and includes the termination of employment on account of the closure of the enterprise in which the employee is employed.
The principle Act read, ‘Cap 28:01 Sec 12C (1) an employer who wishes to retrench five or more employees within a period of six months shall—
New section substituted for section 12C of Cap. 28:01
The principal Act is amended by the repeal of section 12C and the substitution of the following sections-“12C Retrenchment and compensation for loss of employment on retrenchment or in terms of section 12
(4a) (1) An employer who wishes to retrench any one or more employees shall-(a) give written notice of his or her intention
From the principal Act it appeared an employer could retrench employees less than five (5) wily nilly without necessarily following the procedure provided in Sec 12 C. The way it was put across it was on the advantage of the employer as he will retrench employees which are less than five at his discretion. That is he can retrench 4 employees in every six months and he could get away with it. On this provision the law makers had errored themselves by not catering for one employee who has been retrenched. This was corrected in the new law by the above clause on subsection 4a (1). By the insertion of this it now entail that retrenchment is also a way of ending the employment contract. This provision should be a welcome move to the employees as their cover has been extended, but it might make business tough for the employer in the sense that the provision in the principal Act were even burdensome to the employer, however on the new laws am not sure if the employees have to really smile on the following provision on subsection 2 that set a minimum retrenchment package
(2) Unless better terms are agreed between the employer and employees concerned or their representatives, a package (hereinafter called … the minimum retrenchment package”) of not less than one month’s salary or wages for every two years of service as an employee (or the equivalent lesser proportion of one month’s salary or wages for a lesser period of service) shall be paid by the employer as compensation for loss of employment (whether the loss of employment is occasioned by retrenchment or by virtue of termination of employment pursuant to section l2(4aXa), (b) or (c)), no later than date when the notice of termination of employment takes effect.
A retrenchment package is paid as compensation of sudden loss of employment and the above regulate the minimum standard which is one month’s salary for every two years served. This is just a minimum that is employers should either provide favourable package (favourable to the employee) or abide with the stipulated minimum package.
However the ZCTU commentary which is taken as the employee reaction is reported saying ‘This section is about retrenchment procedure and seeks to set a minimum retrenchment package. The amendment is bad in Clause (2) which sets out a minimum retrenchment package of one month’s salary for employees who have saved for two years and an equivalent lesser proportion for employees who saved for a lesser period.
The amendment is ambiguously worded to hide the clear intention that a retrenchment package is simply two weeks’ salary for each year served. -considering that the average minimum wage in the country is US$246-00 (Reserve Bank of Zimbabwe, 2015), 2 weeks’ salary will translate to US$123-00 for year, Can that be called a package?.
There is no consideration of other components of a retrenchment package like severance pay and relocation allowance. International Labour Standards (Termination of Employment Convention No 158, 1982) require payment of adequate compensation. This compensation is very little and will licence employers to terminate a contract willy nilly.
The employees therefore have the following preposition to strengthen the amendment:
– (2) The minimum retrenchment package of one month’s salary for each year of service and a severance pay of 3 months’ salary and a relocation allowance of one month’s salary shall be paid by the employer as compensation for loss of employment regardless of whether the loss of employment is occasioned by retrenchment or by virtue of termination of employment pursuant to section 12 (4a) (a), (b) or(c). Add sub-clause (2i) to read ‘nothing contained in subsection (2) shall prevent an employer and the employees or their representative from negotiating for a retrenchment package above the minimum retrenchment package and in the event of a dispute such dispute shall be referred to the employment council or retrenchment board.
To the employer’s side it’s a welcome move as it cuts down the retrenchment bill as we have had in some instances as reported to the press were a company will be required to pay thousands of dollars and in some cases a million of dollars which is totally insane in the business environment as this will simply lead to closure of business. To my understanding when a company is retrenching it means it is failing to lug its labour bill so it retrench as a way of diminution of labour costs hence it must not be that difficult to retrench if we really want the economy to take off and the growth of business.
However in South Africa Severance pay is at least one week’s remuneration per completed year of service. Remuneration is calculated including basic salary and payments in kind. To make it two weeks salary for every two weeks served. The employer does not have to pay severance pay if an employee unreasonably refuses to accept an offer of employment with the current employer or another employer (sections 41(2), 41(4) of the Basic Conditions of Employment Act). It must be remembered that severance pay for employees that fall under the scope of a bargaining council such as the MEIBC or MIBCO may be different to the minimum prescribed by the BCEA.
In Zambia Severance Pay is at least 2 months’ basic pay for each completed year of service in the event of medical discharge. If an employer summarily dismisses an employee (without notice or paying in lieu of it) and the Labour Commissioner or Labour Officer finds it to be unfair, the employer would be required to pay severance benefit of at least 2 months’ basic pay for each completed year of service. In the event of economic dismissals/redundancy, workers are entitled to two months’ basic pay for each completed year of service.
Source: §9, 10 & 12(3) of the Minimum Wages and Conditions of Employment (General) Order, 2011 (amended in 2012); §9, 10 & 11 (3) of the Minimum Wages and Conditions of Employment (Shop Workers) Order, 2011 (amended in 2012)
This proves that in other countries its actually more expensive to retrench any employee I believe this provision has to be changed as times goes because employees will be actually going home with nothing, this was supposed to be made a transitional provision so as to help business to pull through the current economic hardships, but it promotes rampant retrenchments in the industry. It high time employers should learn that laying off employees won’t do them any better but rather preparing themselves to closure, Because the employees can be used to gain financial invincibility. We need a better law to protect the vulnerable employee, because it’s simply means all those who has served a company 6 years and below are not in any way better as compared to those employees who lost jobs on termination of notice. In other words the employer common law right to terminate the employment contract of notice was legally removed, but it was technically reinstated under minimum retrenchment package.
Read more of my articles on The Sunday Mail website (www.sundaymail.co.zw) as I look into Constructive dismissal.
Brenald Chinyowa contributes weekly on www.sundaymail.co.zw and writes in his personal capacity. Feedback email email@example.com