The layoff or retrenchment of workers is an option that rests with the employer. It must be established that there is a fundamental difference between layoff or retrenchment and that of termination of employment.
The difference primarily lies in the basis for the action and the procedure to be followed in the execution of the decision. In the case of termination, this could be enforced as a result of the employee having breached the terms and conditions of employment, or where the employee’s actions are inimical to the interest of the place of work.
With the exception of termination or dismissal for reason of cause, in which instance the employee has committed an ungracious act such as that of stealing or lying, the employer is required to serve reasonable notice of pending termination. The employer has an obligation to the payment of salary or wage, which is sometimes paid in lieu of notice.
On termination, the employee is entitled to accrued holiday with pay regardless of the grounds of dismissal. As applicable in the jurisdiction of Barbados, on termination of an employee, the employer is required to provide that employee with a Termination Of Services/Lay-Off Certificate.
The layoff or the retrenchment of workers is exercised by the employer after having determined that there is a need to reduce the operational expenditure of the business or company. In most instances, the decision of the employer to lay off staff is based on the need to reduce the high payroll expenditure. The slowdown in business also accounts for the laying off of employees.
It is said that the layoffs often bear no relation to the performance of the employee, nor is it a form of disciplinary action which is being imposed. In the instance where an employee is laid off due to a slowdown in business, the possibility exists that the individual could be re-engaged, should there be an improvement in the business finances within a specific time period.
Retrenchment is described as the forced layoff of workers by the employee. It is considered to be the termination of service of an employee by an employer for any reason other than that of punishment due to disciplinary action. The retrenchment of an employee has nothing to do with
voluntary retirement, superannuation, non-renewal of contract, and/or the termination of employment on the ground of continued ill-health.
Retrenchment usually results in a permanent separation from the organization. The difference is that layoff can be a temporary state where an employee remains out of the job for a specific period of time. The implementation of a retrenchment programme does not in all instances mean that there will be the loss of jobs.
As the company or organization moves to cut or reduce any and all unnecessary spending, this might require downsizing. This may result in closing offices or cutting back on the diversity of products or services offered. In such a restructuring process, staff members may be forced to revert to substantive job positions, resulting in a reduction of pay and possible benefits. Others may be required to accept reduction in salaries by agreeing to take up lower positions or assignments.
In some instances, there are warning signs that signal the possibility of layoffs or retrenchment. The slowdown of business is a prime indicator. The employer’s implementation of a programme of reduced hours of work and short week employment makes it quite evident. With respect to retrenchment, notice of the pending closure of an operation, amalgamation or merger, are usually clear indicators.
Where the decision is taken to retrench workers, the company or organization should pay all salaries (including unconsumed annual leave, notice pay, and so on) to the employees on their last day of work. The employee as entitled should receive severance payment, which is payable by the company. This payment is not taxable.
There are some best practices to be followed in instituting a programme of layoffs or retrenchment. It is required that the employer act responsibly and consult with the trade union as the accredited representative of the workers; especially if there is an existing bargaining unit. Further, it is expected that a notice period would be given to the workers of the intended layoffs and/or retrenchment.
(Dennis De Peiza is labour management consultant with Regional Management Services Inc.)