How to manage the employment relationship when an employee has a grievance

Various mechanisms have been developed in our labour relations system to deal with conflict between employers and employees and the disputes that may arise as a result of the conflict.

The ultimate goal should be to get to a position where there are sound workplace relationships which contribute to productive and high performing workplaces. Employees should be protected from unfair and arbitrary action by employers and employers are entitled to satisfactory conduct and work performance from their employees.

Grievance and disciplinary procedures provide a mechanism for managing workplace conflict:

• A grievance concerns unhappiness on the part of an employee in connection with that employee’s work environment or relationships with others (colleagues or management) in the workplace.
• Discipline concerns unhappiness on the side of management with an employee’s conduct and capacity.

The aim of disciplinary and grievance procedures is to prevent and resolve conflict, settle disputes, protect both the interests of management and employees and to provide an in-house system for resolving issues and communicating in order to deal effectively with workplace disputes.

An employer should not accept a grievance which is not related to the workplace as an employer would not have the power to resolve such a grievance. If the employee has personal problems that are not work-related they should be referred to the appropriate external body for assistance.

A grievance cannot be used as the reason to implement disciplinary action against an employee, although the finding of the chairperson of a grievance hearing may very well be to recommend the initiation of disciplinary action against another employee or the complainant him/herself, if it is considered to be necessary.

Examples of valid grounds for grievances are:

• discrimination;
• victimisation;
• bullying;
• harassment of any kind e.g. sexual, physical, psychological, emotional, verbal; creating a toxic work environment; intimidation;
• provocation;
• abuse;
• lack of cooperation and support which impairs an employee’s ability to perform his or her duties;
• poor management;
• inadequate safety measures or equipment;
• a toxic work environment.

Ideally, unfair labour practice and alleged discrimination disputes referred by employees to the CCMA should be preceded by attempting to deal with the matter first at the workplace by lodging a grievance.

A grievance procedure may not be used for appealing against disciplinary action taken. If an employee is unhappy with disciplinary action that has been taken against him/her, the employee may challenge the disciplinary action and refer an unfair labour practice dispute to the CCMA or a bargaining council in terms of the Labour Relations Act 66 of 1995.

A formal grievance procedure should ideally be reduced to writing with clear time-limits and should specify the steps to be followed and the individuals that will be involved in dealing with and hearing the grievance lodged.

However, where an employer does not have a formal grievance procedure, grievances may be dealt with informally provided that the process is fair, transparent and impartial and the following guidelines are followed:

Basic steps in dealing with a grievance:

1. The aggrieved employee should lodge a grievance, preferably in writing, with an immediate supervisor. Should the employee be unfamiliar with the grievance process, employees should be advised to consult HR who should at least guide the employee or give direction with regard to this process.
2. Where the grievance is against the supervisor the procedure should make provision for the grievance to be lodged with the supervisor’s manager; in all other cases the grievance should be lodged with the immediate supervisor.
3. A grievance should be heard and settled as close to the point of origin as possible.
4. Once the grievance is lodged, management should appoint an individual to hear the grievance, preferably a person not involved in the issue complained of.
5. A hearing needs to be convened without delay, ideally within three to five days.
6. The person against whom the grievance is lodged should not be compelled to attend the meeting, but, in exceptional circumstances, given the opportunity to be heard in a separate meeting, if necessary.
7. It is important to ensure that the process is seen to be fair, transparent and impartial. However, where the grievance is of a sensitive nature, such as in the case of sexual harassment, the privacy of the grievant will need to be protected.
8. The aggrieved employee must be allowed to express the grievance freely and openly and to verify his/her version of events and may call witnesses if required.
9. The complainant must be asked what resolution s/he believes would be appropriate.
10. After hearing all interested parties, the person who hears the grievance must make a decision as to the most appropriate manner to deal with the grievance and give reasons for the decision.
11. The decision needs to be realistic and achievable. Ideally the outcome of the grievance proceedings should be provided by no later than two days after the hearing.

What is the nature and purpose of severance pay?

• Retrenchment is a “no-fault” type of dismissal arising from the economic, technological, structural or other similar needs of the employer rather than the conduct or performance of the employee. It is therefore fair that the employer compensates the employee for the loss of employment.
• Severance pay can be described as “bridging finance” to assist a retrenched employee while seeking alternative work.
• Severance pay is linked to an employee’s rate of remuneration and length of service.
• Section 41 of the Basic Conditions of Employment Act 75 of 1997 (BCEA) prescribes that the minimum amount of severance pay that an employer is obliged to pay is the equivalent of one week’s remuneration for each completed year of continuous service.
• An employer may agree to increase it to two weeks or three weeks’ severance pay. Such an agreement is often found in a collective agreement, contract of employment, or may be agreed between the consulting parties during the retrenchment consultation process.

Entitlement to severance pay

• Every retrenched employee has a right to be paid severance pay by the employer if s/he has completed at least one year of continuous service with the employer prior to retrenchment.
• An employee who unreasonably refuses an offer of alternative work by the employer instead of retrenchment, loses his/her entitlement to claim severance pay.
• The BCEA also permits an employee who had a break in service of less than 12 months with the same employer, to claim severance pay including the years of service before the break. The claim is good as long as the break was not longer than 12 months and provided the employee has not already received severance pay for the period of service before the break.
• Employees cannot insist that they be retrenched to claim severance pay if the employer offers them reasonable alternative jobs to avoid their retrenchment. Similarly, employees who accept alternative employment cannot claim severance pay on the basis that the new position is less favourable than the previous one.

Entitlement to payment on the expiry of a fixed-term contract contemplated by section 198B(4)(d) of the Labour Relations Act exceeding 24 months where the employer employs 10 or more employees

• Section 198B of the Labour Relations Act 66 of 1996 (LRA) provides that an employee that earns below the threshold as set out in section 6 of the BCEA, employed on a fixed-term contract on a specific project for a period exceeding 24 months, depending on the terms of any applicable collective agreement, will be entitled to severance pay in an amount equal to at least 1 week’s remuneration for each completed year of continuous service on expiry of the fixed-term contract.
• Employees will not be entitled to any severance pay should the employer offer or secure reasonable alternative employment with a different employer, before the expiry date of the fixed-term contracts, if that new employment commences at the expiry date of the contracts and is on the same or similar terms.
• Should a collective agreement provide that employees employed on fixed-term contracts for more than 24 months will not be entitled to any severance pay, such clause will supersede the provisions of section 198B of the LRA.

What is remuneration?

• The BCEA uses the word “remuneration”, not pay, wage or salary because the payment is more than simply the normal take-home wage of an employee.
• The Minister of Employment and Labour has defined the word “remuneration” for the purpose of calculating leave pay, notice pay and severance pay.
• The definition includes the value of any benefits the employee received, such as accommodation, payments in kind – g. free canteen lunches, the employer’s contribution to any medical aid, pension, provident fund, death or funeral benefit schemes or similar schemes, shift allowances, car allowances, but excludes any payment to enable the employee to travel to and from work, relocation allowances, tips, gifts, entertainment allowances or education/schooling allowances, etc.

How is severance pay calculated?

• The one week’s severance pay per completed year of continuous service is the minimum amount the employer must pay by law. This is based on the gross (before tax) remuneration of the employee.
• To calculate one week’s remuneration, the following formula is applied: monthly remuneration divided by 4.33 equals the weekly remuneration.
• Where an employee’s remuneration or wage changes significantly from time to time, such as when an employee earns commission, payment to that employee must be calculated by reference to the remuneration received during the preceding 13 weeks (section 35(4)(a) of the BCEA).
• Special tax rates apply to severance benefits (see sars.gov.za). To qualify for this, the employer must apply to the South African Revenue Services (SARS) for a tax directive before the severance benefit is paid to the employee.

How to manage the employment relationship where the employer needs to reduce the number of employees it employs for operational, financial or technological reasons (retrenchment)

Restructuring of a business, for whatever reason, can be a traumatic experience for employers and employees alike. When employees lose their jobs through no fault of their own through retrenchments, it is not only they that are affected, but the other employees who are not retrenched (“survivors”) as well. The direct financial cost and indirect morale and adjustment costs to employers in retrenching staff can also be significant.

This trauma can be minimised if employers:

• transparently, sensitively and proactively communicate with employees – the sooner that employees are made aware of the possibility of retrenchment, the better;
• make affected employees aware of their rights and obligations- employers are well-advised to be honest and open and disclose information as far as possible;
• follow best practice procedures when faced with any of these issues Follow the guidelines contained in the Code of Good Practice On Dismissal Based On Operational Requirements;
• ensure that retrenchment is the last resort.

What is retrenchment?

Apart from the dismissal of an employee for misconduct or for incapacity, an employer may dismiss employees for reasons based on the employer’s operational requirements. This is the technical term for a “no fault dismissal”, and what is generally referred to as retrenchment.

“Operational requirements” means requirements based on economic, technological, structural or similar needs of an employer. These factors affect the ability of a business to continue operating at a profit.  The Code of Good Practice on Dismissal based on Operational Requirements explains these terms:

• Economic reasons are those that relate to the financial management of the enterprise. For example, when the high cost of manufacturing reduces the financial viability of a business.
• Technological reasons refer to the introduction of new technology that affects the work relationship either by making existing jobs redundant or by requiring employees to adapt to the new technology or a consequential restructuring of the workplace. For example, an automated payment system in a parking garage.
• Structural reasons relate to the redundancy of posts as a consequence of restructuring the employer’s business. A merger between two businesses is an example of a structural reason.

Small-scale and large-scale retrenchments

There is a difference in the law applicable to small-scale and large-scale retrenchments. A large-scale retrenchment occurs when an employer employs more than 50 people and retrenches a certain number of people over a 12-month period. It is regulated by section 189A of the Labour Relations Act 66 of 1995 (the LRA).

In this guide we will only be dealing with the law relating to small-scale retrenchments; in other words, where an employer employs less than 50 employees.

Checks and balances

The LRA places checks and balances on both the employer’s reason to retrench and the way in which it goes about the retrenchment to ensure that the employee is treated fairly. In this way the law is designed to ensure that an employer does not resort to retrenchment if it can possibly be avoided.

The law places certain duties on all employers that are considering the retrenchment of one or more employees. Before taking any decision to retrench, the employer is required to consult with employees. Consultation requires joint meaningful engagement in an attempt to reach agreement. The employer must listen and respond to the input of the employee, but has the discretion to make the final decision.

Who must the employer consult with?

The employer is required to consult with employees, either directly or via an employee representative body. If there is a collective agreement specifying any person the employer must consult with, the employer must comply with this. If there is no collective agreement regulating consultation, the employer must consult with:

• A Workplace Forum (if such a body has been established) as well as any registered trade union whose members are likely to be affected by the proposed dismissals
• If there is no Workplace Forum, the employer must consult with any registered trade union whose members are likely to be affected.
• If there is no registered trade union representing employees, the employer must consult directly with the employees concerned or their nominated representatives.
• If some of the employees are represented by a trade union and others are not, an employer must consult with both the trade union, and the unrepresented employees, or their nominated representatives.

The consultation process

The LRA describes consultation as a “joint consensus-seeking process”. The consultation process must start as soon as the possibility of retrenchment is contemplated.

The purpose of consultation is to try to reach consensus on appropriate ways-

• to avoid the dismissals;
• to minimise the number of dismissals;
• to change the timing of the dismissals;
• to mitigate the adverse effects of the dismissals;
• to determine the method for selecting those to be retrenched;
• to determine the amount of severance pay to be paid to dismissed employees.

The process begins with a written Invitation to Consult, which must set out the information required by section 189(3) of the LRA.

Relevant information for a meaningful consultation process

In order to allow for meaningful consultation, the LRA requires that the employer makes a written disclosure of relevant information, including, but not limited to, the reasons for the retrenchment, alternatives to retrenchment that have been considered, the possibility of future re-employment, and the provision of any other reasonable assistance to employees who are to be retrenched such as time off to find alternative work; the proposed method for selecting which employees to retrench;  the period during which the dismissals are likely to take place; and the severance pay proposed. If the reason for retrenchment is financial hardship, the employer should be prepared to disclose financial information to support this.

The employer is also required to disclose how many people it employs, and how many have been retrenched in the last twelve months, since these figures (together with the number now contemplated) will determine whether the retrenchment is a large-scale or small-scale one.

Consultation meeting

The submission of the invitation to consult is followed by a consultation meeting, where the employees and/or their representatives can make proposals to avoid retrenchment or to mitigate the effect of the retrenchments. If the employer does not agree with the proposals made by the employees, it must give reasons. If the employees’ proposals are made in writing, the employer must respond in writing. It may be necessary to hold several consultation meetings in order to allow for proper discussion of all of the issues.

Reasonable alternatives to avoid retrenchment

Alternatives to avoid retrenchment may take a variety of forms. For example, it may be possible for the employer to arrange job sharing, short time, or make an arrangement for the employee to take unpaid leave for educational purposes.

Employers who are facing financial distress are encouraged to adopt preventative measures by, for example, engaging the services of Productivity South Africa (PSA). PSA’s services include “Business Turnaround & Recovery Programme”, an intervention that delivers turnaround and contingency plans for businesses that are facing financial ruin, job loss and business sustainability challenges.

PSA also offers an “Enterprise Competitiveness and Sustainability Programme” that serves, amongst other, to identify ways for businesses of all sizes to increase productivity, increase profitability by reducing costs and improving resource utilisation, and to enhance the efficient use of resources.

In addition, employers who are facing business distress are encouraged to contact the CCMA to determine whether they comply with the requirements of the Temporary Employer/Employee Relief Scheme (TERS). This is not to be confused with the Covid-19 TERS that operated for part of 2020 and in response to business distress caused by the Covid-19 lockdown.

Selection criteria

One of the more contentious areas for consultation is the selection criteria or – the method of selecting those to be retrenched. Employers will often want to retrench those that they regard as being less productive or poor performers, but this is not advisable. Retrenchment is a no- fault dismissal and should not be used as an excuse for employers to rid themselves of those they subjectively regard as “dead wood”. The criteria for selecting those to be retrenched must be fair and objective. A criterion which is often used and is widely accepted as being fair is “Last In, First Out” (“LIFO”) – in other words, those with the shortest service will be selected first for retrenchment. This can be applied per job category and provision can also be made for the retention of scarce skills. Other criteria that may be used are experience, skills and capability. It is always important to take into account the impact of selection on employment equity and transformation. Criteria may not include any which could amount unfair to discrimination e.g. pregnancy, race etc.

What is Severance Pay?

Severance Pay is a statutory entitlement in terms of the Basic Conditions of Employment Act No. 75 of 1997, as amended (BCEA), which an employee is entitled to upon retrenchment. It should not be confused with “service pay” which is not recognised by the law but refers to a gratuitous payment or gift that an employer may present to an employee for long service according to the employer’s discretion, policy or in terms of a contract.

The minimum amount of severance pay in terms of the Basic Conditions of Employment Act 75 of 1997 (BCEA) is one week’s remuneration per completed year of continuous service, but employees are free to try to negotiate more than this. Note that “remuneration” includes, but is not limited to, the value of any benefits the employee received, such as accommodation, payments in kind e.g. free canteen lunches, the employer’s contribution to any medical aid, pension, provident fund, death or funeral benefit schemes or similar schemes, shift allowances and car allowances (for work purposes). The law does not recognise pro rata severance pay for incomplete years of service, but again this may be negotiated between the employer and employees.

Although, every employee who has completed at least one year of continuous service with the employer is entitled to be paid severance pay if retrenched, an employee who unreasonably refuses an offer of alternative work by the employer (either with the same employer or with a different employer) instead of retrenchment, loses his/her entitlement to claim severance pay.

Employees cannot insist that they be retrenched to claim severance pay if the employer offers them reasonable alternative jobs to avoid their retrenchment. Similarly, employees who accept alternative employment cannot claim severance pay on the basis that the new position is less favourable than the previous one.

Conclusion of the consultation process.

The consultation process may result in an agreement being reached with some or all of the employees, or in the worst case scenario, no agreement being reached at all. In either case the employer may then start to give formal notice to those who are affected by the retrenchments. Where no agreement has been reached the employees may then exercise their rights to challenge the dismissals; it is thus preferable for employers to make every effort to reach a retrenchment agreement with the employees.