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Retrenching? Why Not Consider This Alternative First?

As the Covid-19 Pandemic continues to affect businesses all over the world, companies are seeing the effects of this through decline of customer base and cashflow. This unfortunately puts pressure on staff retention and could lead to retrenchments.

However, before you consider retrenchment, there are other alternatives to consider, one of these being demoting employees to reduce the cash pressure on the business.

As it is a change in the terms and conditions of the employees’ contract, any demotion needs to take place in consultation with the employee. If this is not done then the demotion may be seen as unfair and can be reversed.

Demotion can occur in the following ways:

* The employee’s pay and/or responsibilities being reduced.

* The employee’s subordinates being taken away.

* The employee being required to report to someone who used to report to him/her.

* An employee acting temporarily in one position being transferred back to his/her old position.

Should an employee refuse the demotion, then the employer can continue with retrenchments and as long as the reason for refusal is justifiable, the employee will be entitled to severance pay.

It is important in any labour matter, but especially when dealing with a change of terms of employment, to obtain the employee’s consent to a demotion in writing. Should an employer demote an employee without affording the employee the right to be heard, it could amount to an unfair labour practice with the employer being liable to the employee for either reinstatement or compensation.

Alternatives to retrenchment like reduction in working hours, reduction of salary or demotion, may assist businesses with easing financial distress of COVID-19 and keeping employees employed at the same time.

We can assist with all types of labour issues from retrenchments to putting alternatives in place.

For further information or assistance with Employment or Labour Law aspects, please contact Myers Attorneys on 011346 2422 or

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