Retrenchment: Having tricky conversations during tough times

By Nikki Viljoen

Share this with your network

It’s always important to have open, frank conversations with your staff. The reality of the situation is that they actually know more than you think, and by being open and honest with them, you are showing that you respect them and that they can be part of the solution, rather than part of the problem, during tough times.

Let’s break it down.

First of all you need to get clarity on the situation. You can’t deal with a problem if you don’t know how big it is, or even what it is. What usually happens in most small businesses is that there are suddenly less sales taking place and you notice that slowly but surely there is less and less money in the bank account. In essence there is a cash flow problem. A lack of finances can only be attributed to:

  • A lack of sales.
  • A lack of collection of money that should be coming in and of course,
  • Too many expenses.

If all of this has been done and the final figures evidence that you have to cut down on your staff, my advice to you is to get an HR Consultant in to assist with the process.

Retrenchment is a very delicate matter and is always very highly emotionally charged, so getting someone else in to do the “heavy lifting” is an expense that you will be grateful for down the line.

All the staff need to be called in and the situation needs to be explained to them in detail. Allow some latitude for what you are saying to sink in. Understand that from their perspective, although many will have a fair idea that something like this would happen, when it does, it is a completely different experience.

Once the announcement has been made, your HR Consultant will explain the process of what is going to happen to the staff, and it is as follows:

Phase 1

1. The employees will be encouraged to think about ways for the company to save money going forward. It’s a good idea to let them know that you have already “trimmed the fat” and that all the cost-saving measures have already taken place, so that they can see that you have been trying to sort the problems out and that retrenchment is the last option that is available to the company.

2. The employees will be encouraged, especially those near retirement age, to take early retirement or voluntary retrenchment or alternatively to perhaps take a cut in salary or a cut in the number of work hours.

3. You need to give your employees time to absorb the information that they have just been given. Usually 48 hours is sufficient before they all get called in again, but this will also be dependent upon who steps forward to take the offer of early retirement or voluntary retrenchment.

Phase 2

1. The employees are advised of all the people who are taking early retirement or voluntary retrenchment. Please remember to let the HR Consultant do all the talking, but ALL the Directors/Owners of the business need to be present.

2. If point #1 of Phase 2 is sufficient to allow significant savings, and that these savings are enough to allow the company to continue without further retrenchments taking place, this is now the time to tell the employees that retrenchment is now off the table. Unfortunately this is very seldom, if ever the case.

3. The employees should now be given the opportunity to come forward with their suggestions in terms of how to help the company save sufficient costs in order to ensure that the company is able to continue trading.

4. The Directors/Owners of the company must now give due consideration to the suggestions made as well as to those who have decided to take early retirement or voluntary retrenchment. Please remember that you are not obliged to accept someone’s request to retire early or voluntary retrenchment if that someone is key to the company being able to continue operating successfully.

5. You now need to give yourselves sufficient time to deliberate properly on what has come out of Phase 2. Usually 48 hours is sufficient before they all get called in again, but this will also be dependent upon how long it takes to do the proper calculations on whether the company can survive after the suggestions have been implemented and the cost of the early retirees and voluntary retrenchments have been taken into account.

Phase 3

1. The time now has come to call the staff in for a final consultation to relay the outcome. Again, it is better to let the HR Consultant do this, but you all need to be present.

2. The staff need to be told either the good news or the bad news as to who are leaving and when.

Don’t forget

If you are restructuring, then everybody in the department that is closing down is at risk.

If you are retrenching then the rule is for the ‘last in’ to be the ‘first out’.

Where possible try and find alternative employment for those who are being retrenched – it goes a long way to showing your commitment to your staff.

Do not ever use the retrenchment process to get rid of problem employees as this could end up at the CCMA and cause you a world of pain.

Be honest, be direct and be fair. Pay what you have to and do it as quickly as possible.

is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or or for any policies and procedures that you may require.

Share this with your network