If your business has been affected by the harsh economic times, you are probably looking at ways to reduce your outgoings.
With labour costs often making up a large portion of the overall business costs, reducing this expenditure could well be your business priority this year.
The process of reducing labour costs by downsizing is what is referred to as redundancy.
Getting the redundancy procedure right is critical to the well-being of any business. Employer mistakes can render their procedure unfair and consequently, open a floodgate of claims by employees who feel aggrieved by what they may consider a false redundancy.
Here are common misunderstandings and mistakes employers ought to avoid.
Unjustified redundancy
Even where an employer intends to pay for the notice period, the notice of intended redundancy must issue to the employees, noting the extent and reasons leading to the same.
It does not simply suffice that an employer picks on a specific employee and proceeds to attach a reason of redundancy for termination of employment.
A redundancy must therefore be justified before an employer can commence the process.
Making an employee apply for their own job as a way of circumventing the laid procedures while maintaining the objective to downsize will no doubt be problematic.
The court is likely to identify the mischief, and in turn, unravel the false redundancy.
The justification of the redundancy is upon the employer as redundancy cannot be applied as a general term to lay off an employee on a whim, as held by the Court of Appeal in Kenya Airways Limited -vs- Aviation and Allied Workers Union Kenya and Others [2014] eKLR.
Failure to issue statutory notices and collective consultation
The obligation to notify the labour officer and inform and consult with recognised employee representatives such as trade unions lies on the employer.
Section 40 (1) (a) of the Employment Act provides that where the employee is a member of a trade union, the employer notifies the union, to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy:
Since redundancy is the loss of employment by involuntary means, through no fault of the employee and which involves the termination of employment at the initiative of the employer, it is important that employers who intend to lay off employees engage them in a collective consultative session.
These sessions provide an opportunity to explain to the affected employees the reasons for the intended termination, while also helping them cope with the reality of job loss.
If this requirement is omitted, the court would declare the process flawed.
Failure to apply a fair selection criterion
Employers should take precautions by establishing reasonable, fair and objective selection criteria to be independently applied in determining individual employees to be selected for redundancy.
Failing to take due regard to seniority in time, skill, ability and reliability of an employee in the selection process would render the process suspicious, as it falls short of the provision of section 40 (1)(c) of the Employment Act.
Although the approach of ‘last in, first out’ is perceived as fair and less controversial selection criteria, it is a blunt tool that may result in the loss of the best talents for the employer.
It also bears the risk of age discrimination claims, as younger employees are more likely to be the last ones in.
The position held by the selected employees must disappear
An employer cannot retain a position while at the same time declaring it redundant.
Similarly, an employer declaring redundancy cannot commence recruitment of new employees, to replace existing employees who have ongoing contracts of employment and hold substantive offices in a similar capacity as the advertised position.
Effecting terminations of employment
At this final stage, the issues to consider will include- obtaining acceptable alternative employment or redeployment, consideration of whether employees will serve their notice periods, or be paid in lieu of the same payment of final dues and issuance certificate of service.
An employer should make reasonable efforts in all circumstances, to redeploy affected employees to alternative acceptable employment.
There is a substantial obligation on the employer to obtain for an otherwise redundant employee. A directly or indirectly comparable position within the organisation or with an associated entity.
In the absence of alternative employment, an employer is required by law to make full redundancy payments as per section 40(1)(g) of the Employment Act.
In Kenya, the redundancy payments will include; Severance pay, leave days and a month's notice or one month’s wage in lieu of notice. Severance pay is calculated at the rate of 15 days’ pay for each completed year.
To meet this obligation, an employer ought to establish clearly what vacancies are available, then inform employees of these and assist them to pursue an appointment.
If an employee is not appointed, then the employer should ensure that there are sound and defensible reasons for this decision.
On the other hand, an employee may reject genuinely comparable employment in which case, the employer will only be obliged to pay terminal dues.
This contrasts with the situation where an employee takes a comparatively lower-paid position, in which case the employer may be obliged to continue to pay the employee at their previous higher rate.
