Troubled retailer Nakumatt has embarked on a massive layoffs plan targeting 800 employees in a move that has triggered a vicious war with the workers’ union.
The company’s court-appointed administrator, Peter Kahi, said the layoffs are in line with the rescue plan he has crafted for the business that nearly collapsed under the weight of debt.
“As part of the business recovery strategy, we have commenced a rightsizing exercise. This exercise is geared to aligning the human resource base with the current organisational needs,” Mr Kahi said in an interview.
Nakumatt had “over 4,000 employees” at the height of its growth but the administrator said it was yet to establish how many will be left after the layoff exercise.
The retailer has suffered mass exodus of workers in the past six months as it stumbled to near collapse.
Mr Kahi said the retail chain’s business is currently revolving around 13 branches, but it continues to carry a workforce to run 45 branches necessitating the trimming of staff numbers.
The union representing Nakumatt staff reacted sharply to the retrenchment plan and accused the administrator of breaching labour laws and a Collective Bargaining Agreement (CBA) reached with the workers.
Kenya Union of Commercial, Food and Allied Workers (Kucfaw) secretary-general Boniface Kavuvi said the Nakumatt administrator had issued the sackings notice on account of insolvency, a declaration he said Nakumatt has not obtained as required by law.
Nakumatt in late January got a reprieve when the High Court granted an application to appoint an administrator to run the company, rather than liquidating it as some creditors had demanded.
The family owned business had been battling to keep its heavily-indebted business afloat amid a push by creditors for its liquidation.
Mr Kahi said the layoffs will largely cover staff members, who had earlier been sent on compulsory leave.
“This disengagement though unintended provides a suitable platform for the business to strike a delicate balance,” he said, adding that “continued retention of workers under compulsory leave terms is not a sustainable option.”
Mr Kivuva said that while Nakumatt is under the law allowed to downsize, sending workers home on account of insolvency amounted to a well calculated scheme to avoid payment of terminal benefits.
“We will not allow the administrator to circumvent the law. We are moving to court to oppose this,” said Mr Kivuva.
Letters of termination given to a section of workers showed some employees have been offered severance pay of up to Sh200,000.
“In my capacity as an agent of the company and in pursuant to Section 40 (2) of the Employment Act, 2007, I have reviewed the affairs of the company and regret to advise that there is insufficient available working capital to permit continued operations at former levels and consequently it has become apparent that your functions as a shop assistant will unfortunately be abolished.
Consequently, your services have been terminated as from 22 February 2018,” said one such letter signed by Mr Kahi.
Mr Kahi says the affected employees will have a preferential claim for arrears of wages/salary up to the date of appointment but not exceeding Sh200,000 or four months in arrears.
But the affected workers termed the sendoff pay meagre, adding it could not adequately compensate for their services.
“I have worked here for two decades and to be sent home in this manner is very painful,” said an employee who sought anonymity.
But Mr Kahi said the payoff package has been computed in line with existing labour laws and regulations.
“Beyond the send-off package, we shall also consider their claim against the company in respect of preferential wages and other unsecured dues. As you are aware the staff have not been paid since July 2017,” said Mr Kahi.
Mr Kivuva, however, said the administrator had gone against earlier assurances to the workers.
Mr Kahi has since announced the appointment of Tusker Mattresses Limited as the new managers for the troubled retailer. The appointment, which is subject to regulatory approvals, would see Tuskys assume operations in management aspects for the troubled retailer.