We are living in difficult economic times globally, and this means the risk of retrenchment is high. Companies are looking for ways to cut costs and, given lower production and output, the only option may be reducing the number of people they employ.
This is a terribly difficult process to go through, for the person doing the retrenching, but most of all for the person being retrenched.
If you find yourself on the wrong side of the retrenchment process, it may be useful to engage an advisor or an appropriately skilled friend to help you work through the process. After all, the company will be using a labor consultant themselves.
Retrenchment packages are often very much the same, consisting of the basics as set out in the Labour Relations Act. These include notice pay and one week of pay for each completed year of service. Leave pay should also be paid out as part of the settlement.
A good labour practitioner should walk you through the process step by step. Section 189 of the Labour Relations Act governs the retrenchment process. Here is a Cliffe Decker Hofmeyer guide on Section 189 that can help to prepare for the consultation process.
S189 is not all that you should consider. Often labour practitioners negate to fully consider the terms of an employee’s employment contract. Two areas of the employment contract that we will consider in this article are: 1. Notice period and 2. The meaning of month vs calendar month. Both of these could see you getting an extra month or two of pay.
1. Notice Period
The retrenchment process does not dissolve the rights and responsibilities contained in the employment contract. If you were obligated to give the company two months notice when resigning, the employer is obligated to give you, the employee, the same notice.
Often the retrenchment notice will stipulate a termination date in 30 days time or may even be effective immediately after the retrenchment process has been finalized. This is the employers’ prerogative, but the full notice period must be paid out to the employee regardless of whether the employer wants them to work during their notice period or not.
2. Month vs Calendar Month
Although there is a common understanding of the different meanings of the above terms, they are not legally defined and are still applied inconsistently in contracts. Generally speaking, a month is considered to be any four weeks, whereas a calendar month means the first day to the last day of the same month.
If you are required to give a calendar month’s notice for employment termination (as when you resign), then similarly, where notice of retrenchment is given, the employer must allow for the notice period to come into effect at the beginning of the new calendar month. As an example, where an employee received a retrenchment notice on the 10th day of the month, and the notice period is one calendar month, the notice period should not end on the 10th of the next month, but rather the last day of the next month. This can result in the employee being paid out an additional two or three weeks worth of income.
The trouble is that employment contracts often do not define calendar month properly within the agreement, making it hard to determine or enforce these rights.
In 2009, the court in SAMRO v Mphatsoe (SAMRO) considered the definition of calendar month vs 30 days notice. The court determined that there was no clearly defined standard term or definition used, and that one would need to consider each contract on its own merit and identify the context in which the term was applied, should it not be defined within the agreement. It is thus helpful to get assistance from an advisor who is well versed in commercial or contract law to review your employment contract and correctly determine your rights.
A helpful litmus test is to remember back to when any of your colleagues resigned. Did they have to wait until the 1st of the month to hand in their resignation notice, or could last days worked be at any time during the month? This sets a precedent and the same should be observed during the retrenchment process.
Ultimately, this is a difficult road to walk for anyone, but it does not need to be walked alone. Find a trusted advisor and make sure you put yourself in the best possible position.