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Is retrenchment your last resort? There may be a better (and cheaper) alternative.

by | Aug 2, 2019 | Finance, People, Strategy | 0 comments

Sometimes retrenchment feels like the only way to survive

In these tough economic times, there are numerous businesses unable to cope with the downturn and considering a reduction in their payroll.

The most common way of reducing payroll has been to reduce headcount by retrenching staff in accordance with section 189 of the Labour Relations Act.

This method has serious financial implications due to the severance pay, notice pay etc., as well as a permanent effect on the business into the future.

This staff reduction often causes disruption in the business processes and affects the morale and productivity of the remaining people.

A further complication is that employers are not allowed to recruit new staff to fill the vacant positions for a period of 6 months after the retrenchment exercise is completed.

In some cases, the retrenchment is done in desperation and in the short to medium term, the business returns to normal with additional contracts as time elapses.

You have another option

For those businesses that wish to avoid the devastating effects of retrenchment and have potential sustainability and viability in the near future, there is a job-saving option offered by the CCMA called the TRAINING LAYOFF SCHEME.

This is an entirely voluntary offer based on an agreement between employers and employees.

The employees do not receive their salary during the training period but receive an allowance of up to 75% of their salary whilst in training.

The employees do not receive their salary during the training period but receive an allowance of up to 75% of their salary whilst in training. This scheme is limited to workers earning up to R 180,000 per annum.

The employer needs to pay the social security contributions such as UIF, pension/provident fund and death/disability cover (if any) for the duration of the training period.

The training programme may last up to 6 months and may be combined with short-time work for the employer if necessary. Periods may be extended on request.

The CCMA is responsible for facilitating and overseeing the training layoff and ensuring compliance. The SETA is responsible for facilitating, and funding the provision of the relevant training. They will be applying to the NSF for training allowances and disbursing to employers.

At the end of this period, should the business not be in a position to continue employing the workers, the retrenchment process may still take place. However, this does offer the workers an opportunity for further training and upskilling in the meantime.

If your business is in distress and you want to take advantage of this scheme and avoid premature retrenchments, make an application through the local CCMA office.

If you’d like any assistance in setting this up, click here to contact us for a meeting today.

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