Introduction
It’s a new year and most businesses are turning a new page, one that is free from the doom and gloom that characterised the years 2020 and 2021. For most businesses, and certainly for those with the entrepreneurial spirit, it is a year for rebuilding.
But, if the past two years have taught us anything, it’s certainly that running a business during a pandemic is like trying to swim against a strong tide whilst carrying a heavy load. However, if you can lighten your load, maybe you can stand a chance of surviving. The question therefore is how and when can you lighten your load in order to ensure the survival of your business?
Well, we discuss the question of how to lighten your load in more detail below. However, it’s worth noting that, focusing on lightening your load alone is not enough. What is equally critical, is the timing of when you can lighten your load.
As such, one of the most important attributes of successful entrepreneurs is the ability to foresee risks and swiftly adapt to change. Those who don’t foresee risks and fail to act swiftly, unfortunately fall victim to numerous risks brought about by change, especially when it is a bad sought of change.
I’ve been fortunate to be approached by both types of entrepreneurs. The survivors, those who saw the pandemic as a risk to their businesses and endeavoured to be prepared for the worst, whilst hoping for the best. On the other hand, I was approached by those unfortunate entrepreneurs who may have seen the risks, failed to act accordingly but still hoped for the best without necessarily preparing for the worst.
An example of one of the “unfortunate” entrepreneurs is one of our clients who approached us when they had exhausted their savings by paying their employees when the business was barely making its monthly targets. By the time they decided to retrench employees, the business no longer had enough money to pay employees’ severance pay, and SARS was knocking on their door for unpaid taxes.
It is therefore crucial that as a business owner you must constantly do a health check of your business and have the foresight to see risks and strategize to avert them before they catch you by surprise. You don’t know what you don’t know, and sometimes just asking the relevant questions might save you and your business. And a relevant question doesn’t have to be a clever or intelligent sounding one. “Should I be worried about my business in the face of this, so called pandemic?”, when asking the right person, can be the torch you need to see in the dark.
The following are some of the subjects on which our clients’ sought answers and we were able to provide them with answers and solutions when the pandemic first hit our shores:
- Employees’ salaries, temporary layoffs and retrenchments;
- The UIF TERS applications and payments; and
- Cancellation of contracts and the application of the force majeure clauses.
Whilst the pandemic is still within our midst, and the world is more than eager to move on, it may be worth recapping some of the valuable lessons learnt during the first two years of the pandemic. In particular, this article will discuss the question whether, and to what to extent an employer can temporarily layoff their employees. This is one of the methods which you as an employer facing hardships can use to lighten your load.
What is a Temporary Lay-off?
Temporary layoffs constitute a temporary suspension of employment for employees in circumstances where the employer is no longer able to afford them due to reduced or diminished business. This was mainly the case with most businesses during the hard lockdown of 2020. What this means is that employees remain employees of the employer, except that they will not be required to work during this period, and they will not be remunerated either.
You can say, temporary layoffs initiate the “no work, no pay” principle for an indefinite period of time. I say ‘indefinite’ because, usually, no one knows when the conditions giving rise to the need for layoffs may subside. The period of layoffs is not specifically provided for in Labour legislation, except to say that it must be a reasonable period of time.
I can certainly appreciate the difficulty of having to layoff your employees, particularly in times of trouble. It’s not an easy thing for you to do as an entrepreneur, particularly because most employees’ livelihoods are solely dependent on their jobs. It’s an extremely difficult place to be as an entrepreneur. However, my view is that temporary sacrifices may be necessary to ensure the survival of your business.
Does an employer need to consult before implementing temporary layoffs?
In fact, not only are you required to consult with employees as an employer, but you must also ensure that you have an agreement with the affected employees. An agreement of this nature may be concluded by discussing with employees and obtaining consent from them. There is also no bar to employers entering into written agreements with employees where layoffs are agreed between an employer and employees. I strongly recommend concluding a written agreement where this is possible.
What is the process to be followed in implementing temporary layoffs?
Most small to medium, even scaling entrepreneurs don’t have unionised employees and are not party to any collective agreements that stipulate the processes for layoffs. Therefore, they must follow the process that is laid out in the Labour Relations Act 66 of 1995, as amended (“LRA”) and the Basic Conditions of Employment Act, 75 of 1997, as amended (“BCEA”). If you are not sure what these processes entail, it is worth getting in touch with an experienced Labour Lawyer or Consultant to assist you with this.
Can temporarily laid off employee claim UIF?
Yes. Employees who may have been temporarily laid off can certainly claim their UIF benefits. The UIF offices are available to assist any employees who may have been temporarily laid off.
How does an employer choose which employees to layoff and which ones to keep?
As mentioned above, an employer must make use of the processes set out in the LRA or BCEA. Mainly, the consultation or discussions in respect of layoffs are initiated through a section 189 of the LRA process. This is a process that is also utilised for initiating retrenchment proceedings.
The section 189 process makes provision for the last in, last out selection process or, where applicable the operational requirements of the business where the employer retains employees with the relevant skills.
Conclusion
It’s been largely a brutal past two years for many entrepreneurs and on the flip side, many ventures have also prospered during the same past two years. I don’t have the facts to back this, (I know it’s not very lawyerly) but I would not be surprised that the past two years have certainly seen a growing number of small to medium businesses making use of legal services than they have done in the past. My view is that it shows the seriousness with which entrepreneurs are approaching their businesses. This maybe further be attributed to the fact that whilst small businesses are small in size, they certainly don’t have small dreams and do not, aim at staying small. The entrepreneurial spirit is alive and well.
Well, whether you are a small, medium or growing business, we would love to be part of your journey here at Legalese and support you as we’ve done with our clients through the years. Just to recap the above, whilst many entrepreneurs sought legal services in respect of employees during the pandemic, this should not be the case. As stated above, employers must constantly do a health check of their businesses and plan accordingly. The slightest indication of business going down should be a trigger for you as an entrepreneur to ask relevant questions from the relevant people. This may be the difference between your business thriving or disappearing into the oblivion.
– Sudden Mutsengi
Have any questions? Drop us a message below and we’ll be in touch!
