East African Portland Cement Company #ticker:EAPCC (EAPCC) has declared redundant all its 800 employees, setting the stage for a leaner workforce with an eye on trimming the company’s bloated wage bill.
Acting EAPCC managing director Stephen Nthei Thursday said the sacked employees’ roles will be merged and salaries reduced to keep the struggling cement maker afloat.
“We have a workforce whose total cost, compared to the productivity, is very high. Our target is to operate with less than 600 people earning less than what they are earning now,” said Mr Nthei.
Employees who successfully reapply for their jobs will be expected to take a 40 percent cut on their previous wages.
Portland Cement had 936 employees at the end of June 2018, split as 448 on permanent basis and 488 on contract, but this has since dropped to about 800 according to the acting MD.
Mr Nthei sent a memo to all employees saying the firm is incurring Sh8 million loss every day, and will have to declare redundancies to escape from collapse.
“All positions of the company will be declared redundant and the employees released. Subsequently, all jobs will be reconfigured in terms of job consolidation and enrichment in line with restructured and leaner organisation structure,” read the memo.
“The company acknowledges that the exercise is a difficult decision but the best option in the present business circumstances.”
He has called for a meeting with all staff on Friday next week at the factory’s headquarters in Athi River.
EAPCC has already notified the workers’ union and the Labour office.
The first group of employees is to be laid off early next month.
Mr Nthei said the management wants a staff count of not more than 600, estimating it intends to spend about Sh600 million in the redundancy.
“It is this high because majority of people who have been on unionisable levels have to be paid their gratuity levels when severing the relationship,” he said.
The management has told staff that all payments will be made at the point of exit. Permanent workers will get a golden handshake of 30 days for every year worked, accrued gratuity, as well as outstanding leave days.
For those on contracts, he said, the only severance will be to pay for contract termination. According to him, majority of the contracts are ending in December, leaving them with just about 25 employees on contract.
It will also have to pay workers Sh1.5 billion that was awarded to contract staff after losing the case to stop the award that was issued by the industrial court in July 2015.
EAPCC is stuck in negative working capital with obligations maturing within the next 12 months outstripping current assets by Sh7.3 billion. This potentially makes it difficult to service its short-term obligations.
However, Mr Nthei said in a phone interview EAPCC is counting on cash inflows from the sale of land to Kenya Railways Corporation (KRC). He says about Sh3 billion is still outstanding.
“We have received commitment of the payment of this money and we want to be matching it with phased implementation of this programme,” said Mr Nthei.
In 2018, EAPCC sold 900 acres of its prime land to KRC at Sh5 billion for an inland depot currently under construction. It has already received a downpayment of Sh1.2 billion.