The ongoing Lockdown has put most businesses under enormous financial pressure. As a result many small business owners have had to, or are considering, doing retrenchments right now. In this article I explain how you can avoid some of the simple mistakes people make when doing retrenchments.
Retrenchments are usually a very unpleasant exercise, but sometimes they’re something that needs to done to keep the business afloat.
However, things can very easily go wrong for you as a business owner or manager, if the correct procedures aren’t followed. Avoid these mistakes and you’ll have a very good chance of being on the right side of a CCMA decision, should an employee consider that they’ve been unfairly retrenched.
The last thing you want is to have to pay out huge sums of money to an ex-employee because you didn’t do the retrenchments correctly. Or even have to re-instate them.
Here are four of the most common mistakes that people make when doing retrenchments. And they’re so easy to avoid:
1. Deciding beforehand who should go
When you’re starting to think about retrenchments, don’t decide at this stage who’s to go. This is a very common mistake. The law says that you must follow certain retrenchment procedures. The first of these states that when you are contemplating a retrenchment, you must first consult with your staff. During this consultation you must discuss ways to try and avoid it. Do this before deciding to retrench and who it is that’s going to go. Consult with them first. If you don’t you’ll make the mistake of a fait accompli retrenchment (deciding beforehand) and it’s procedurally incorrect.
For more detail on all the procedures you need to follow when doing retrenchments, you should read my recent article: Retrenchments Under COVID-19 Lockdown. The steps are all laid out for you and are easy to follow. This will mean that your whole retrenchment exercise will be procedurally correct.
2. The reason for retrenchment
Your reason to retrench must be bona fide. In other words it must be genuine, for the sake of the business. You should not have any ulterior motives to want to get rid of some staff members and hence embark on a retrenchment exercise. This retrenchment mistake will get you into trouble.
When you consult with your staff, you’ll need to explain why you need to retrench, and why it’s necessary for the business. Therefore the reason must be genuine. Something like financial, technical or to restructure the business.
3. Consult with the right people
When you’re contemplating a retrenchment you’ll need to consult with all parties that are likely to be affected by the retrenchment. Not just the employees who you think are going to be retrenched. This includes anybody who “could, may or possibly be affected by, not only an actual dismissal but by any amendment to their functions, terms and condition of employment, title, status, etc.”
So if any of your staff member’s job functions may change as a result of the retrenchment, they need to be included in the consultation process as well.
4. Selection criteria
One of the biggest mistakes that you can make during the retrenchment process is to select the employees that are going to be retrenched without first consulting with your staff (namely those who are likely to be affected). During this consultation process you need to agree with them on the selection criteria – i.e. how you are going to decide on who it is that’s going to go. It could be skills you need to retain or LIFO or another selection criterion.
If you can’t agree on the selection criteria, then your selection of employees to be retrenched must be fair and objective. Don’t use criteria like poor performance or bad disciplinary record when selecting employees to be retrenched; they aren’t fair and objective.
These are just some of the many pitfalls you may experience when undertaking a retrenchment exercise. Just stay clear of these basic mistakes that I’ve mentioned and you’ll be well on your way to getting the process right. And making it far easier for yourself.
If you need personal support with your retrenchments to help you stay clear of the many problems or pitfalls, please don’t hesitate to email me. Just leave me your contact details and I will get in touch with you.
I have summarised the information in the article above your convenience. If you need more detail on the subject, read Common Errors Made by Employer When Streamlining.
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