Can you contest a retrenchment, demotion or pay cut?

Published on 25th August, 2020 at 01:10 pm

With companies taking austerity measures to stay afloat amid and in the aftermath of the COVID-19 lockdown, find out what your rights are when it comes to your employment prospects with these expert insights.

Can I contest a retrenchment?

Before unpacking this question, it’s important to understand the standard process all employers should follow if they are considering retrenchments.

First, your employer’s decision to retrench must be a genuine one, which is based on a commercial rationale, says Rudolf Kuhn, an attorney specialising in labour law. “If the employer’s decision is not based on reasons that are objectively linked to genuine operational reasons, such as the company’s financial difficulties, or a restructuring of the company’s business, then the retrenchment will be substantively unfair,” he adds.

Your employer’s decision can only be taken once a formal consultation process between you and your employer has been completed. This serves a vital role; it’s an opportunity for your employer and you, as the employee, to explore alternatives to dismissal. “This is the first point at which you, as the employee, can challenge a proposed retrenchment by questioning, both in meetings and in writing, the stated reason for the contemplated retrenchment,” says Neels van Rooyen, a Cape Town labour lawyer.

With this in mind, Kuhn concludes: “It’s not a prerequisite for an employee to agree to a retrenchment before the employer implements it.”

The financial impact of retrenchment can be devastating for you and your loved ones. Read this for 10 tips to help you cope

Is my employer obliged to try and find a position for me elsewhere in the company?
While your employer is expected to consider alternatives to retrenchment, it isn’t obliged to find alternative employment opportunities for you – either within or outside of the business, says Kuhn.

But don’t let that be the final stop in the process of your retrenchment, as van Rooyen explains: “If a position exists for which you, as the employee, may possibly be suitable, the company should alert you to it.” He also notes the importance of suggesting alternative positions you could fill, or requesting information regarding possible alternatives, which the company is obliged to consider.

Watch out
While your employer may offer you an alternative position, it could come with the downside of not matching your current salary or even resulting in a demotion. That’s why it’s important to consider all your options during the consultation process.

Am I entitled to retrenchment pay?
Yes, you are entitled to what is known as ‘severance pay’ or a ‘severance package’ upon retrenchment, but this depends on how long you’ve been in the company’s employ. You can expect (and should ask about) three balances due to you when ending your employment:

1. Notice pay
   If you’ve been employed at the company for more than a year, you’re entitled to a month’s salary. “Often employers elect, as they are allowed to, to pay an employee in lieu of notice instead of requiring that they work the notice, but the employer may also require an employee to work out their notice,” says van Rooyen.

2. Accrued annual leave
   This would be the rand balance of leave days you’ve saved up and are still owed at the time of retrenchment.

3. Severance pay
   This equals one week’s pay for each completed year of service, but there are some nuances to it. “This amount can be negotiated but most employers will only pay the bare legal minimum amount,” says van Rooyen. “If, however, they want to settle the termination of employment by agreement, they may offer a larger severance amount as inducement.”

In times like these, it helps to have an additional pocket of emergency savings to soften the blow of a job loss. Use this savings tool to calculate how much money you should be saving each month to reach your savings goals.

Can I be forced to take a pay cut?

Similar to the consideration of retrenchment, you have the right to agree to a pay cut in order for it to be lawful, says van Rooyen. You can contest a pay cut, but if your employer can prove that a reduction in overhead (salary expense being part of this) is needed for the business to continue operating, your employer may go ahead with retrenchment proceedings.

With this in mind, depending on your circumstances, it may serve you better to stay with the company and accept the pay cut as an alternative to a retrenchment. Even if your employer does start the retrenchment process, you have the option to suggest a pay cut be proposed again as an alternative to termination of employment.

Watch out

“A draconian pay cut such as a 50% pay cut (this will depend on the circumstances) may be grounds for an unfair labour practice,” cautions Kuhn. Learn more about how to deal with unfair labour practice further on.

If you’re struggling to make ends meet as a result of the COVID-19 lockdown, find out what you can do to ease the pinch here.

Can my employer change my role or job description, or demote me, to save costs?

Yes, they can, but similarly to pay cuts, you as the employee need to agree to the change. If this is done unilaterally, without consultation, and/or without your consent, it may, depending on the circumstances, constitute an unfair labour practice, say both experts.

Again, remember that if you are trying to avoid retrenchment as a final outcome, it may serve you better to accept a role change, as long as it’s conducted fairly.

What are my other options?
Depending on your individual circumstances, your employer could be open to other options such as a temporary lay-off or job cut, or an agreement to work half-day, says Kuhn.

When the future of your employment hangs in the balance, it’s time to speak to a financial planner about changes in your priorities. Speak with one today by booking a meeting here.

Feel any austerity measures impacting you have been conducted unfairly?

Don’t hesitate to get legal counsel about any of the issues discussed here, and as van Rooyen notes, it’s better to get advice immediately rather than after the fact.

If after trying to resolve any matter internally with your employer you’ve had no success, you have the right to refer an unfair labour practice dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA), within 90 days from the date that your employer refuses to address or resolve your grievance. If you are retrenched and you feel that your dismissal is unfair, obtain legal advice from an attorney that is registered with the Legal Practice Council. You must refer an unfair dismissal dispute within 30 days after your employment was terminated.

For more answers about your employment rights in these uncertain times, read this.