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Recently proposed labour law amendments will, if implemented, result in employers having to pay retrenchees two weeks’ pay per year of service instead of the 1 week per year currently prescribed. While this would initially assist retrenchees financially until they find new work it will deplete the finances of employers who are retrenching. This extra cost could force employers to retrench more employees as a way of making up for the cost of the doubled retrenchment bill. This will not only weaken the viability of the business but will also cause increased unemployment.
This amendment might make sense in a case where the employer is retrenching for reasons other than financial difficulties, such as the introduction of AI or other technology to replace employees.
Based on the abovementioned potential unintended consequences of doubling the severance pay, ought the legislators to rethink this proposed amendment?The plight of the increasing numbers of retrenhees in South Africa is dire because their retrenchment packages are unlikely to last until they find another job even if they are fortunate enough to do so. However, the solution is not to double the burden on businesses that are retrenching due to financial difficulties. Doubling the burden that struggling businesses have to bear will severely worsen their already weak financial circumstances and result, at best, in more retrenchments and, at worst, in more business closures.
While doubling retrenchees’ packages might be a great populist political tactic it will backfire on workers trying to keep their jobs.I agree that the amount of severance pay due to retrenched employees should be increased. However, I also agree that it might impose an insurmountable burden on some employers who are unable to afford it. I would suggest that the suggested amendment allow for a process whereby employers, who cannot afford the two weeks, can apply for an exemption in the same way that employers who are not members of bargaining councils can apply for an exemption from wage increases where the bargaining council agreement, making provision for an increase, applies to them.
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