Companies should think twice before retrenching

A study into the impact of worldwide economic decline on HR management within local companies, initiated by Accsys PeoplePlace, the recruitment division of Accsys, a national supplier of payroll, HR, Time & Attendance and Access Control solutions, has found that retrenchment is not necessarily the first course of action available or necessarily adopted by decision makers.

Whilst the Labour Relations Act allows an employer to retrench employees for operational requirements, the reality is that there are a myriad of factors that must be considered by both employee and employer as they face the challenge of existing socio-economic difficulty says Teryl Schroenn, CEO at Accsys.

Schroenn says that the division continues to monitor activity within recruitment as a direct result of retrenchment.

This, she says, is a growing reality in the local market and is fuelling unemployment - the hardest hit sectors being manufacturing, mining, financial services/ banking, construction and engineering.

As a recognised specialist in HR development and people management in business, Accsys management felt it necessary and in the best interests of their clients, partners and customers to investigate the issue further.

The decision was made to initiate an information-gathering campaign targeting companies that are retrenching and those that are not.

The objective, said Schroenn, was to find ways of addressing and getting feedback as to how and what could be done to proactively respond to the cloud of retrenchment looming over employees.

Critical to this study was to get the views of different clients as to whether retrenchments are the only solution when the market is faced with the results of the global economic crisis. It is often when the worst seems to be over that company owners and executives have time to strategically evaluate their employment needs for the future.

“It was interesting to note the various strategies adopted by those operations that are not retrenching or have not retrenched. One of these strategies is to remain resilient and take advantage of the situation by applying pressure on sales to increase promotion whilst competitors are slowing down. Other aspects of strategy include not replacing employees who have resigned, reducing hours of work, doing away with outsourcing services and repositioning or restructuring of resources to more active areas of the business,” says Schroenn.

Furthermore, many companies approached agreed that it was best to continuously forecast and study the fluctuation of business in order to tally employee contracts with anticipated business.

“Overall many businesses suggested that in difficult times it is best to diversify through vertical and horizontal integration so as to minimise risk,” adds Schroenn.

Accsys PeoplePlace has drafted a synopsis of advice/ factors to consider in the process of retrenchment. The idea is that it would be of benefit to both employees and employers.

“Our position is that there ought to be a valid reason and acceptable justification to retrench. Some organisations are retrenching and freezing posts simply because that is what others are doing. Make an introspection of your internal process, conduct cost benefit analysis as well as feasibly studies and analyse your market position before you decide. We advocate the exploration of other opportunities before retrenchment,” adds Schroenn.

“The issue of retrenchment and due process is a reality and a concern for the market. It is foremost on the minds of both employers and employees and a critical element of people management. Clearly the more opportunity we have for frank, open discussion and the transfer of meaningful information, the better,” she says.