Mining producer inflation driving overall PPI higher, says SEIFSA

Mining producer inflation driving overall PPI higher, says SEIFSA

JOHANNESBURG, 24 JUNE 2021 – The rise in producer price inflation (PPI) is concerning, given that it was driven mainly by mining – a key supplier of Metals and Engineering (M&E) industry raw material, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.

Data released by Statistics SA showed that producer price inflation of final manufactured goods rose from a low level of 3.5% in January 2021 to a highest level of 7.4% in May. One of the biggest contributors to this increase was the mining sector, whose producer inflation shot up from 10.8% in April to 21.7% in May. Mining producer inflation has averaged 16% since January, putting pressure on the financial position of M&E producing companies with regards to cost of production.

SEIFSA Chief Economist Chifipa Mhango said other contributing factors to PPI were rising transport and energy costs. “As producer prices increase, this has implications towards the overall picture of consumer prices. Manufacturers take in costs of production such as electricity costs, transport costs, as well as mining products into their price-setting equation. Producers are passing on these costs to consumers, and this is evident in consumer price inflation numbers, which show that inflation rose from 4.4% in April to 5.2% in May,” he said. 

Prices for intermediate manufactured goods increased from a low base of 8.6% in January to 15.2% in May. “Although this is positive news for the producers of intermediate goods in M&E sector in terms of potential revenue, in a depressed market this might negatively impact key consumer market affordability, resulting in lower sales volumes,” Mr Mhango said. 

Mr Mhango noted that globally, producer price inflation will continue to pick up amid increased global economic activity as COVID-19 vaccines are rolled out in advanced economies. He said that the latest data shows that PPI in the eurozone is at 7.6%, while it is 9% and 6.6% in China and the US respectively. “This could be a concern on the global inflation outlook,” he said.


Retrenchments: What is the correct procedure?

Retrenchments are an aspect of business that many employers hope is never a reality for their businesses. With unpredictable markets, a slow-growing economy, the effects of COVID-19 and increased competition, many companies are having to implement retrenchments in order to remain open and profitable.

Employers often do not understand that several procedures need to be followed when retrenching employees in order to ensure that the retrenchment is fair. These legal requirements are outlined in the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA);  the onus is on the employer to follow the correct procedures. If these procedures are not conducted effectively and correctly, you could end up at the Centre for Dispute Resolution or even the Labour Court, which could bear a heavy price. We examine the procedures for fair retrenchments in more detail below.

What are retrenchments and when to consider them?

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In order to understand the retrenchment process, we need to define retrenchments. A retrenchment is a form of dismissal due to no fault of the employee. Section 213 of the Labour Relations Act defines operational requirements as “requirements based on the economic, technological, structural or similar needs of the employer”. More often than not, when a business is in financial distress, an employer would dismiss employees due to its operational requirements. Below we define these operational requirements in more detail:

  • Economic requirements – in general terms, “economic requirements” refers to the ability to make a profit or to retain sufficient funds to continue operations. These reasons may not relate to the business’s current financial state, but may refer to its projected financial circumstances. In this case, a company is often no longer in a financial position to employ all its current employees.

  • Technological requirements – these requirements often refer to the introduction of new technologies, systems and techniques that reduce the need for labour and make certain jobs redundant. Examples of these include innovative machinery, computer packages and electronic systems. These technological advances often result in the faster completion of tasks and reduce the need for the number of employees needed to perform operations.

  • Structural requirements – these requirements often relate to the need to flatten the management structure in relation to challenges or progress within the workforce. In this case, positions become redundant when structural changes need to be made. These changes are then reflected in the business’s organogram or organisational chart.

It is essential to note that an employer needs to provide fair reasons and genuine operational requirements for the retrenchments in order for them to be considered honest, just and in good faith. An employer cannot use a retrenchment as a way to dismiss undesirable employees.

Correct and fair retrenchment procedure

As mentioned above, it is imperative that the retrenchment process is fair. To ensure this, an employer will need to follow the procedural guidelines and proposed method for retrenchments outlined in Section 189 of the Labour Relations Act as well as Sections 35, 37 and 41 of the Basic Conditions of Employment Act. This process has been outlined in the steps below:

  1. Consultation

The employer will need to first provide written notice of the proposed retrenchment plans and invite the consulting employees/party to consult with it on this matter. The written document will need to include all relevant information related to the proposed dismissals.

The employer and employees will then consult with each other with the aim of coming to an agreement. This consultation process refers to a joint consensus-seeking process between the employer and the employees or employee representatives. This process must take place as soon as the employer contemplates retrenchment with:

  • Any person the employer is obliged to consult in terms of a collective agreement;

  • If there is no collective agreement, a workplace forum;

  • If there is no workplace forum, a registered trade union whose members are likely to be affected or

  • the employee/s likely to be involved and affected

The process of consultation aims to provide solutions that aim to:

  • avoid the dismissals (examples of solutions could include adjusting working hours, eliminating temporary labour, eliminating overtime, offering early retirement, etc.);

  • minimise the number of dismissals;

  • adjust the timing of the retrenchment;

  • provide ways to lessen the effects of the retrenchment;

  • provide information on the method for selecting the employees to be dismissed; and

  • discuss severance pay options.

  1. Disclosing information in writing

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The second step of the retrenchment process requires the employer to give written notice to the employees or their representatives that discloses all relevant information. This includes:

  • a valid reason for the proposed retrenchments;

  • the alternatives considered by the employer to avoid the retrenchments and the reasons why these were rejected;

  • the number of employees that will be affected as well as their job categories;

  • the selection criteria that will be utilised for selecting employees;

  • the timing of the dismissals;

  • the proposed severance pay;

  • what assistance the employer will offer the employees who have been retrenched (examples of this could include offering employees time off to attend interviews, an early release should a new job be found, issuing letters of reference, etc.); and

  • the possibility of future re-employment.

During this process, the consulting employees may request the employer to disclose more information if they feel that the information provided is not sufficient.

  1. Opportunity for feedback 

Once the information has been submitted in writing, the employer must give the consulting employees the opportunity to make presentations that must be considered and responded to.

  1. Criteria for selection

The criteria for selecting employees for retrenchments need to be fair and objective. In many cases, the employer may turn to the accepted selection criteria outlined by the CCMA’s Code of Good Practice on dismissal based on Operational Requirements. This code includes criteria based on “last in,  first out” (LIFO), the length of service, performance, skills and qualifications. Each of these elements must be examined when selecting employees for retrenchment.

It must be mentioned that the above process is for small-scale retrenchments of a business with fewer than 50 employees. The procedure for larger-scale retrenchments, where the employer has more than 50 employees, has been adapted in accordance with Section 189A of the Labour Relations Act, which can be viewed here.

Payment packages types and how to calculate them 

Payment packages are often an area of concern for both employers and employees, which is why there are guidelines contained in the BCEA for different payment packages related to retrenchments. These include:

  • Severance pay –  Employees should be paid at least one week’s remuneration for each completed and continued year of service. In this case, remuneration includes the employee’s basic salary, payment in kind and discretionary payments related to performance and working hours. Should an employee unreasonably refuse an offer of alternative employment, he/she will not be entitled to a severance package, according to Section  41(4) of the Basic Conditions of Employment Act).

  • Leave pay – all outstanding leave is to be paid out; this includes annual leave or time off that has not been taken.

  • Notice pay –  If employed for less than six months, one week’s notice pay must be paid to the employee. If employed for more than six months but not more than one year, two weeks’ notice pay must be paid to the employee. If employed for more than a year, four weeks’ notice must be paid to the employee. The employer may require employees to work/not to work during the notice period.

  • Ex gratia payment – a collective agreement may stipulate ex gratia payments, over and above the severance pay upon the retrenchment of employees.

Legal consequences for unfair retrenchments

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If an employee feels that they have been unfairly retrenched and that they may have a case for unfair dismissal, they are able to approach the CCMA or a Bargaining Council and dispute the retrenchment. Retrenchment cases will need to be submitted within 30 days of the retrenchment. If this process is unsuccessful, the employee/s can then refer this matter to the Labour Court.

If it is found that the retrenchment process was unfair or if the correct procedure was not followed, the Labour Court can require the employer to rehire the employee or compensate the employee with 12 months’ remuneration. On the other hand, where it is found that the actual reason for the retrenchment was based on any form of discrimination such as race, religion, sexual orientation etc., the compensation amount can be as much as 24 months of remuneration.

Conclusion

Retrenchments have a significant impact on employees and a business as a whole, especially in a country like South Africa where the unemployment rate is so high. In order for the rights of retrenched to be protected, the legal aspects of the retrenchment process, as outlined by the Labour Relations Act and the Basic Conditions of Employment Act, must be adhered to and appropriate measures are taken. These measures are in place to protect employees, reduce job losses and ensure that businesses comply with the law. If retrenchments are conducted unfairly and not as per the outlined procedures, the company will be penalised and negatively impacted.

For access to more information related to labour law and retrenchments, sign up to our SEIFSA resources portal.

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What is a standard employment contract?

In South Africa, it is a legal requirement that everyone you employ, as an employer, has a written employment contract. The employment contract outlines the conditions of employment and includes information with regards to the following circumstances: what is expected from the employee, annual leave, job title, hours of work, remuneration and more.

In the Main Agreement, this is not so, unless it is a Limited duration contract in which the Main Agreement serves as the outline. However, we do strongly recommend that employees be given a contract to encourage clarity and give certainty.
We examine what an employment contract is, the advantages for both the employee and the employer and do’s and don’ts for drafting an employment contract in more detail below.

What is an employment contract?

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In simple terms, an employment contract falls within the scope of commercial contracts, hence it needs to be in writing. An employment contract is an agreement between the parties (employer and employee) and serves as the primary evidence relied upon to enforce the parties’ contractual rights.

An employment contract regulates the terms and conditions of employment between the employer and the employee. It includes information on what the employer will provide and specifies what the employee is entitled to in relation to company policy, benefits and labour legislation for the specific work performed.

The employment contract is governed by the Basic Conditions of Employment Act (BCEA) and is required by law to be presented to the employee no later than the first day of commencement of employment. An employment contract needs to be agreed upon in the form of written consent.

There is no such requirement in the Main Agreement as explained above.

It is important to note that there are different types of employment contracts that relate to the employment being offered. Each of these types of employment, which include permanent, fixed-term, probation and project employment, have been set out in the Labour Relations Act, 2014 (Act No. 6 of 2014) (LRA) and relate to the way in which employees will be employed. These include:

  • Permanent employee: A permanent employee is employed for an undetermined period of time at their place of work. A contract of employment for an undetermined period of time has no agreed date of notice of termination (except retirement age). Such a contract is terminated by either the employer (dismissal) or the employee (resignation) on notice.

  • Part-time employees: A part-time employee is a person compensated based on the period of time s/he works (the hours s/he works), which is less than the period of time the employer’s permanent employees work.

  • Fixed-term employee: A fixed-term employee, also known as a temporary employee, is a person employed for a determined period of time. This is usually no more than three months of employment. A contract of employment for a determined period of time has an agreed date of termination, being either a specific calendar date or the occurrence of a specific event.

The Main Agreement has specific rules on Fixed Term Contracts, called Limited Duration Contracts, which take precedence over the LRA in this specific area.

What elements are included in an employment contract?

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When drafting an employment contract, several material issues need to be considered. These are often referred to as essentiala (essential elements), and they must be present in the contract for the contract to be legally sound. These essential elements would typically be the rendering of services by the employee for remuneration paid by the employer. It would also include job description, non-disclosure of trade secrets, compensation, normal payment, etc. If these essential elements are not contained in a contract, the contract could be void due to vagueness and, therefore, be unenforceable.

An employment contract also usually includes additional clauses, which are often referred to as naturalia. These provisions would relate to leave, overtime, termination of employment, sick leave cycle, maternity leave, incapacity and deductions. Included in these clauses would be a section on the family responsibility leave days available. These provisions include if the employee’s child is born, if the employee’s child or adopted child is sick, as well as the death of the employee’s spouse or life partner, the death of the employee’s parent, adoptive parent, grandchild, grandparent, or sibling.

The naturalia section would highlight all the specifics regarding what would happen in the case of an illness, such as the need to bring a medical certificate from a medical practitioner to work on the day of an employee’s return. This applies if the employee is off work for more than two consecutive days or if s/he  has been absent on more than two occasions in an eight-week period, as highlighted in Section 23 of the BCEA. It also specifies the remuneration for employees working on official public holidays, such as New Year’s Day, and Sundays.

The Main Agreement also refers to having to produce a sick note on Mondays and Fridays, and before and after public holidays.

All of the elements mentioned in the naturalia section are legal requirements that are governed by either employment legislation (BCEA) or a collective agreement in a particular sector (such as the Main Agreement for the Metals Industry). These provisions naturally find application in employment contracts by law and serve as the bare minimum and cannot be “contracted away”. It will always benefit both parties to include these provisions since they express inclusion.

Why is it important to draft an employment contract?

The main objective of drafting an employment contract is to ensure that both the employee and the employer know what is expected of them. In this way, both parties are protected against any breach or unlawful action relating to the conditions of employment.

An employment contract also protects the employer. If all the company’s policies, disciplinary codes, etc., are included in the contract, the employee will have all the information necessary to ensure that s/he adheres to those standards and requirements. In the same way, the employee is protected by having all elements related to employment included in the contract, meaning that the employer cannot take advantage or act unlawfully towards the employee.

Our SEIFSA Employment Contract Do’s and Don’ts

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Drafting a sound and enforceable contract takes a considerable amount of skill and understanding of employment law and complex substantive contract law. However, employment contracts do need to be drafted with employment legislation in mind and to comply with relevant statutory prescriptions. It is essential that an employment contract is clear, has a logical structure and incorporates the rules of best practice.

To make the process of drafting an employment contract a little simpler, we have put together a list of Do’s and Don’ts below.

Employment Contract Do’s:

  • Do start with a generic form as a guide and adapt it to your particular situation and make sure to address issues prescribed by employment legislation, such as working hours, leave, deduction of monies and salary or wage.

  • Do title the document “EMPLOYMENT CONTRACT” so that there can be no mistake as to its intent.

  • Do make sure the parties are properly identified in the first paragraph, that names are spelt correctly and that addresses are accurate.

  • Do date the contract on the day it was signed and indicate where it was signed. If the parties sign on different dates, the date of the contract will be the date when the last party signs. Also, include the date of commencement of employment (and termination date if the contract is temporary in nature).

  • Do use common-sense headings to make it easier to find particular provisions in the contract.

  • Do number the paragraphs for ease of reference.

  • Do use plain language whenever possible.

  • Do define all technical terms.

  • Do consider the placement of punctuation marks, since even a misplaced comma can change the meaning of a sentence.

  • Do carefully review the use of conjunctions, especially “and” and “or,” since the word you choose can have a dramatic impact on meaning, and preferably draft your contract in the active voice.

  • Do make sure that the contract addresses all possible contingencies and that nothing is left to chance.

  • Do have your SEIFSA IR and Legal expert review every contract before you sign it.

  • Do ask your SEIFSA IR and Legal expert any questions you may have about the contract — remember, there is no such thing as a stupid question, but it can be stupid to let a question go unasked and unanswered and pay for it later.

  • Do initial every page of the contract and make sure the other party does the same so that nothing is missed.

  • Do include notarisation, if required by applicable law.

  • Do retain a copy of the contract for your records.

Employment Contract Don’ts:

  • Don’t include legalese or archaic phrases like “the party of the first part”, “heretofore,” etc. They generally add little in terms of clarity.

  • Don’t include overly long sentences; instead, break sentences down into easily digestible thoughts.

  • Don’t be repetitive – unless it is absolutely necessary to do so. It is preferable to refer back to a previous provision according to its number or heading, rather than to repeat it verbatim.

  • Don’t assume the other party defines terms the way you do. If there is any doubt, include a definition in the contract.

  • Don’t read the contract hurriedly. It takes time to understand all the possible nuances of the language used.

  • Don’t accept the other party’s oral explanation of a confusing term. Include everything in writing.

  • Don’t start acting according to the terms of the contract until both parties have signed it.

  • Don’t agree to a modification of the contract without getting it written and signed by both parties.

  • Don’t assume that the use of a standard or form contract eliminates the need for your lawyer’s review. Even if a standard contract worked well in one instance, a change of circumstances, date, or party could change the whole equation.

Conclusion

Employment contracts are required by law and need to add clarity to the employment terms by including information related to working hours, job requirements, leave, remuneration and more. This legal contract protects both the employee and the employer and ensures that there is no unlawful action from either party. To get your free employment contract template, sign up to our SEIFSA resources portal.

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Michael’s Magic

Well, the heading is somewhat flattering. So, let’s just agree that there are some tongue-in-cheek comments in that headline.

Some people in the SEIFSA office said I must use my platinum-coloured hair as a marketing strategy and boast of my years of experience in industrial relations and labour law matters. I said okay (actually they didn’t say platinum, but let’s stick with that).

It’s been a very busy year on the IR front, and I’ve been involved with chairing disciplinary hearings, representing and guiding companies during the processes and consultative meetings of retrenchments, short-time, disputes, strikes, leave enhancement pay exemptions, conciliation, and arbitration hearings, not to mention issues arising from the conditions of employment found in the Main Agreement and the BCEA.

I do enjoy assisting companies, helping them do these things right the first time. And, yes, it does happen that I have to help companies fix problems where companies may not have done things as best as they can or should have the first time around. But it’s always best to do things right from the start, and not have to fix things – so keep in touch with us from the start!

Besides the consultancy service, I have presented a lot of training courses over the years and still do that. Some of you may have attended some of them (I hope you enjoyed them!). During the lock-down period, we really got going with the webinars, and at some, there were over 100 people in attendance.

If you haven’t already, please consider coming to one of our workshops, whether on the Main Agreement or Water-tight Dismissals (Chairing Disciplinary Hearings) or Managing Absenteeism and Misconduct or Successfully Implementing Retrenchments, Short-time and Lay-offs. We would love to share that time with you.

Then amongst all of that, there are the numerous queries that come through via the phone and email, where we try and resolve any issues and questions that you may have. 

But now we are at the end of 2020; it has been a strange and unusual year, and hopefully, we all got through it well. It’s nearly time for holidays, and hopefully, yours will be just what you need, whether invigorating and exciting or surrounded by calm and peace or a combination of the two, I hope it just blesses, motivates, and inspires you.

So, keep the faith, keep believing (is that a bit like the song from Journey – Don’t stop believing?), keep motivated and inspired. We are all in this together – we can do it.

Have an awesome holiday, a blessed Christmas, and a prosperous 2021.


The Miya Minute

Hello, and welcome to the Miya Minute and our Division’s first-ever digital newsletter.

As you have already gathered from Louwressè, my name is Vuyiswa Miya, and I am also an admitted attorney, with the sole mission of providing you, the SEIFSA member or stakeholder, with the best legal advice so that your business maintains an even keel –  even during these disturbing times.

Yes, I am declaring it. The word “unprecedented” has now officially been over-used. The COVID-19 pandemic has thrust upon us almost apocalyptic waves of change. The numbers are cataclysmic – and cannot be compared to any single event. You know this. I know this. So, what is it that we as a collective are supposed to do?

Survive, Focus, Listen, and Comply (SFLC). In that order!

Survive

The industry can’t afford to lose your business’s capacity. So, make sure your business is still around next year and the year after that. This means that you might need to make tough decisions and even tougher choices. You are not alone: SEIFSA can be your guide, specifically with Section 189 processes and procedures.

Focus

Ensure that your stakeholders know what is going on with your business. Talk with your suppliers and customers alike. Keep those relationships strong.

Listen

There will be lots of information and advice coming to you from many sources. Trusted sources, such as SEIFSA, whose mission it is to be of assistance to employers. Attend seminars like its Labour Law Seminar, and keep an eye on its website for updates on legislation, etc.

Comply

Know the law, and apply the law in your business. This is almost a back-to-basics approach. Once again, the IR&LS Division is here to help you with that quest.

I will be using “The Miya Minute” to showcase how you can SFLC over the next few months with SEIFSA’s help.

Talk to me and let me know what your challenges are.

Contact Vuyiswa (vuyiswa@seifsa.co.za).


The View from Louwressè

Greetings from me, Louwressè Specht.

I’m sure some of you would have had the opportunity to see and listen to some of my musings on our Free Webinar Wednesday sessions. If so, I hope you found some of the information useful, and even entertaining. For those that don’t yet know me, well, ek is ‘n meisie van die Vaal (I’m that girl from the Vaal) –  straight up, no-nonsense, to the point – and always enthusiastic to help.

It’s coming up to my first anniversary at SEIFSA, and the one thing I can say categorically is that every morning I am inspired by the culture of “wanting to help our members, and the industry overall”, which is on display at SEIFSA every day. The number of times I’ve heard “get them on the phone” or “go and visit them” are just too numerous – and that is the way we do things in my Division, Industrial Relations, and Legal Services, or simply IR&LS.

To have the honour of leading this Division is simply extraordinary as we are at the forefront of change, not only for our members, but for the industry as a whole. This year’s highlight was, of course, the historic wage standstill agreement. However, this SEIFSA Division has had an important legacy, long before I joined, having benefited from people such as Lucio Trentini and Michael Lavender, who are still with SEIFSA to this day.

Today I am pleased that this legacy is carried forward by a team of two admitted attorneys, myself and Ms. Vuyiswa Miya, whom you will hear from in “The Miya Minute”, and then, of course, our stalwart, Michael Lavender. From time to time, I will pull in SEIFSA’s “Jedi Master”, otherwise known as Lucio Trentini, SEIFSA’s Operations Director,  and ask him some pointed Industrial Relations questions – to keep him on his toes, of course.

So, welcome to the first edition of The Watch. I do hope you enjoy the content and that it is helpful to you and for the success of your business. My section will be dedicated to keeping you informed of legal happenings.

Over to you, Ms Vuyiswa Miya…


Employee Layoffs: How the Main Agreement Helps Employers

Laying off employees a situation that no employer wants to find themselves in. Knowing the process can and will alleviate many head-aches down the road. 

The lay-offs provisions of the Main Agreement provide a practical alternative to retrenchment. These provisions enable the management of employee layoffs on a temporary basis pending an improvement in prevailing business conditions or other adverse conditions facing a company at a particular time.

The Agreement defines “Lay-off” to mean the temporary suspension of employment due to a reduction in the volume of work in an establishment or section of an establishment or due to other economic reasons. The maximum duration of the lay-off is an eight week period unless otherwise agreed between management and any trade unions representing the affected employees. 

The employment of the laid-off employees during this period is merely suspended and is not terminated. No wages are paid during the lay-off and the affected employees do not accumulate any shifts for purposes of leave and leave enhancement pay purposes.

Notification

Management wishing to implement the lay-off arrangements to the Main Agreement must notify the regional office of the bargaining council and any trade unions representing the affected employees 14 days before the intended date of the commencement of the lay-off. The notification may be made by telephone (provided that this is subsequently confirmed in writing), telegram, registered email, or telefax transmission.

The notification must contain the following information:

  • The occupational categories of the employees proposed to be laid off;
  • The reason for the lay-off; and 
  • The estimated duration of the lay-off.

Consultation 

Following notification of the intended lay-off, management must consult jointly with all the trade unions representing the affected employees. The objective of this consultation process is to discuss:

  • Ways and means of avoiding or limiting the intended lay-off; and
  • The selection criteria to be used to identify those employees who will be laid off.

It is to be expected that the trade union representatives may wish to explore alternatives to the lay-off. The following measures may be considered in this regards:

Measures to avoid lay-offs

The following types of measures may be implemented to avoid or reduce the effect of lay-offs:

  1. Reduction of the workforce through natural attrition.
  2. Restriction of new hirings by means of recruiting and promoting from within the organisation.
  3. Elimination of all “casual” labour.
  4. Non-renewal of short-term contracts of employment. [Note that the termination of fixed period short-term contracts of employment, prior to their expiry date, is not possible without the agreement of the employees concerned].
  5. Ceasing overtime.
  6. Voluntary retrenchments
  7. Placing employees in a short time.
  8. Job sharing and job rotation schemes.
  9. Any other viable scheme that will result in a reduction of the impact of retrenchment.

Management must ensure that the employees who are selected for lay-off have been identified according to clear criteria that have either been:

Agreed by the consulting parties; or

Where no such criteria have been agreed upon, according to criteria that are fair and objective.

Fair and objective selection criteria

Fair and objective section criteria may compromise certain or a combination of the following International Labour Organisation [ILO] guidelines:

  • The need for the efficient operation of the undertaking, establishment, or service;
  • The ability, experience, skill, and occupational qualifications of individual workers;
  • Length of service [the so-called LIFO principle]; and 
  • A family situation or such other criteria as may be appropriate under the circumstances.

Ideally, the consultation process should conclude with an agreement between the parties regarding the manner of implementation of the lay-off. However, this is not a precondition for the implementation of a lay-off. Management, having consulted with the respective parties, has a right to implement the lay-off even where no agreement is reached with the consulting parties in this regard.

Employee notification

Following the joint consultation process, management must give the affected employees a minimum of five full shifts notice of their lay-off. This notice must also include details of the date on which the employees are required to report back to work.

Where an employee does not return to work within three working days of the stipulated return date, he or she will be deemed to have terminated his/her employment with the company unless this absence is condoned by management.

General Provisions

The following general provisions apply in respect of employee lay-offs:

  • Employees on lay-off are entitled to elect to have their services terminated.
  • Employees are entitled to engage in any employment for gain during the lay-off period.
  • Where an employee is required to report for duty to ascertain whether or not work will be made available, the employee must be provided with not less than four hours’ work or be paid in lieu thereof where no work is available.

The Main Agreement ensures that Employee layoffs don’t become a minefield for employers. Remember, that the dangers for employers are that the employees could contest the fairness of the suspension itself or could take the notification as a dismissal and take the employer to CCMA or bargaining council on this basis. 

Contact SEIFSA for training or consultation and ensure you are on the right track.


EMPLOYMENT CONTRACTS – The DOs and DON’Ts

Although most contracts are concluded informally, contracts of a commercial nature should be recorded in writing. Employment contracts fall within the scope of commercial contracts, because what is an employment contract then if not one of rendering services and payment for rendering such services. The contractual document is an instrument that reflects the agreement between the parties and serves as the primary evidence relied upon to enforce the parties’ contractual rights.

There are material issues that need to be dealt with when drafting an employment contract. These are often referred to by lawyers as essentiala (essential elements) and have to be present in a contract in order for the contract to qualify as a specific type of contract. In an employment contract, these would typically be the rendering of services by the employee for remuneration paid by the employer. If these essential elements are not contained in a contract, the contract could be void due to vagueness and, therefore, be unenforceable.

Contracts also contain additional clauses, called naturalia, and these provisions apply to specific contracts even though parties may not specifically agree to these provisions. In the case of an employment contract, these would be provisions relating to leave or working hours contained in employment legislation or the collective agreement in a particular sector. These basic provisions naturally find application in employment contracts by law, serve as the bare minimum and cannot be “contracted away”. It is always to the benefit of parties to include these provisions since the express inclusion will bring these provisions to the attention of the parties and eradicate any uncertainty.

The main objectives when drafting a contract is to draft it clearly in a way that ensures that the parties to the contract know exactly what is expected of them, and that the parties and a court will interpret the contract in a way the parties intended.

 THE DOs

  1. Do start with a generic form as a guide, and adapt it to your particular situation and make sure to address issues described by employment legislation, such as working hours, leave and remuneration
  1. Do entitle the document “EMPLOYMENT CONTRACT” so that there can be no mistake as to its intent.
  1. Do make sure the parties are properly identified in the first paragraph, that names are spelled correctly and that addresses are accurate.
  1. Do  date the contract on the day it was signed and indicate where it was signed. If the parties sign on different dates, the date of the contract will be the date when the last party signs. Also, include the date of commencement of employment (and termination date if the contract is temporary in nature).
  1. Do use common-sense headings to make it easier to find particular provisions in the contract.
  1. Do number the paragraphs for ease of reference.
  1. Do use plain language whenever possible.
  1. Do define all technical terms.
  1. Do consider the placement of punctuation marks, since even a misplaced comma can change the meaning of a sentence.
  1. Do carefully review the use of conjunctions, especially “and” and “or,” since the word you choose can have a dramatic impact on meaning, and preferably draft your contract in the active voice.
  1. Domake sure that the contract addresses all possible contingencies and that nothing is left to chance.
  1. Do have your attorney review every contract before you sign it.
  1. Doask your attorney any questions you may have about the contract — remember, there is no such thing as a stupid question, but it can be stupid to let a question go unanswered and pay for it later.
  1. Dosign in blue or other coloured ink to make the original easily distinguishable from photocopies.
  1. Doinitial every page of the contract and make sure the other party does the same so that nothing is missed.
  1. Doinclude notarization if required by applicable law.
  1. Do retain a copy of the contract for your records.

THE DON’Ts

  1. Don’t include legalese or archaic phrases like “the party of the first part”, “heretofore,” etc. They generally add little in terms of clarity.
  1. Don’t include overly long sentences; rather, break sentences down into easily digestible thoughts.
  1. Don’t be repetitive – unless it is absolutely necessary to do so. It is preferable to refer back to a previous provision according to its number or heading rather than to repeat it verbatim.
  1. Don’t assume the other party defines terms the way you do. If there is any doubt, include a definition in the contract.
  1. Don’t read the contract over hurriedly. It takes time to understand all of the possible nuances of the language used.
  1. Don’t accept the other party’s oral explanation of a confusing term. Include everything in writing.

 

  1. Don’t start acting according to the terms of the contract until both parties have executed it.
  1. Don’t agree to a modification of the contract without memorializing it in writing.
  1. Don’t assume that use of a standard or form contract eliminates the need for your lawyer’s review. Even if a standard contract worked well in one instance, a change of circumstances, date, or party can change the whole equation.

There are no set legal rules or legal requirements that require contracts to be drafted in a particular way. However, care must be taken to investigate the application of employment legislation in order to comply with any relevant statutory prescriptions when drafting. Care must also be taken to ensure that your contract follows a clear, logical structure and incorporates the rules of best practice.

Drafting a sound and enforceable contract takes considerable skill that requires attention and understanding of employment law and complex substantive contract law. It is, therefore, crucial that a contract be drafted by someone who has demonstrable expertise in and sound knowledge of both fields.

One must keep in mind that the contract serves as the primary evidence of contractual rights. A court cannot conclude a contract for the parties and a court has no jurisdiction to correct or improve a contract or its wording, unless the court is required to do so in time-consuming and very costly litigation.

Ends

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What You Need To Know About Company Disciplinary Policy and Code in the Metals and Engineering Sector

A Management Guide to Disciplinary Policy

It is management’s responsibility to maintain discipline within the workplace. The disciplinary policy must apply to and form part of the contract of employment of all employees up to a level determined by individual companies. SEIFSA understands that this arena of management can cause consternation for all parties, and may have legal repercussions. Thankfully, the SEIFSA Industrial Relations and Legal Services Division has the requisite expertise to advise and represent member and non-member companies in the intricacies of implementing company policies relating to Discipline in the work place.

The first area to be clarified should be Disciplinary warnings. Any warning issued should be kept in the personal file of the employee for the duration of the warning. Should the employee commit no further breach of the disciplinary code within that period, the warning will become null and void and should be removed from the employee’s personal file. Expired warnings should play no role in any subsequent disciplinary action.

The time periods relating to the expiry of warnings are generally as follows:

  • Verbal warnings…………………. three months
  • Written warnings………………… nine months
  • Final written warnings……………. Twelve months

The above-mentioned time periods may vary from organisation to organisation, depending on the individual organisation’s disciplinary policy.

Relevant factors and circumstances should be taken into account in determining the appropriate disciplinary action. These includes length of service, previous offences, the period since the last offence, status and any mitigating circumstances.

Nature of disciplinary measures

There are four types of disciplinary measures which may be applied, namely:

  • Verbal warning;
  • Written warning;
  • Final written warning; and
  • Formal enquiry and dismissal.

All disciplinary warnings are cumulative in nature. An employee who is already in receipt of a verbal warning for a particular offence and who commits any other offence of a similar nature within the prescribed time period will be subject to the next step in the disciplinary procedure, i.e. written warning, final warning or dismissal, depending on the nature and severity of the second offence.

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Disciplinary procedures

Level One: verbal warning

If the immediate supervisor is of the opinion that the behaviour or performance of an employee is unsatisfactory, but does not warrant a written warning, final written warning or dismissal, then a verbal warning will be given.

The verbal warning shall be given to the employee in the presence of a shop steward or employee representative and the reason for issuing the warning should be explained to the employee and representative. A record of the warning should be placed in the employee’s personal file. A verbal warning shall remain valid for three months.

Level Two: written warning

If, subsequent to issuing a verbal warning, the supervisor or manager is still not satisfied with the performance or behaviour of the employee, or if the employee commits another offence which requires a written warning, the supervisor and the immediate superior shall discuss the nature of the transgression, the corrective action and the disciplinary steps with the employee in the presence of a shop steward or employee representative and a management witness.

The supervisor must complete a Disciplinary Report Form. The employee and the shop steward or employee representative must sign the form to acknowledge receipt of the written warning, even though the employee may not necessarily agree with the disciplinary action applied. If the employee refuses to sign the warning, then the supervisor should merely note that fact on the form.

The disciplinary warning should be placed in the employee’s personal file and a copy of the warning should be given to the employee. This written warning shall remain valid for nine months from the date of issue.

Level three: final written warning

If, subsequent to issuing a written warning, the supervisor is still not satisfied with the performance or behaviour of the employee or if the employee commits another offence within the prescribed period of nine months or commits any offence which warrants a final written warning, then the same procedure as detailed in level two shall be followed – except that a final written warning shall be issued. The final written warning shall remain valid for 12 months from the date of issue.

The supervisor shall ensure that the employee and the shop steward or employee representative are made aware that should the employee commit a further offence within the 12-month period following the issuing of the final written warning, then that offence may result in dismissal, pending a final decision at a formal disciplinary enquiry.

Level four: formal disciplinary enquiry

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If, subsequent to issuing a final written warning, the supervisor is still not satisfied with the performance or behaviour of the employee or if the employee commits a further offence within the prescribed 12-month period or commits any offence which may justify dismissal, then the supervisor shall request a formal disciplinary enquiry.

The supervisor shall complete the Disciplinary Report Form stating the grounds for the enquiry. The supervisor will report the matter to the Human Resources Manager and hand over the disciplinary report. In the absence of a Human Resources Manager in the department concerned, the supervisor may hand the disciplinary report to any Designated Manager.

The Manager shall inform the employee and the shop steward or employee representative in writing, by way of the Formal Disciplinary Enquiry Notification Form, of the following:

 

  • The reason for the enquiry;
  • The date, time and venue of the enquiry;
  • The rights of the employee at the enquiry, namely:
  • the right to timeous notification of the intention to convene the disciplinary enquiry and the grounds for enquiry;
  • the right to be represented by a shop steward or employee representative;
  • the right to translation, if required;
  • the right to call and cross-examine witnesses;
  • the right to a fair and proper hearing.

The employee shall be given 48 hours’ notice to appear before an independent Chairperson of the enquiry to conduct a formal disciplinary enquiry.

The enquiry is held in the presence of the employee, the shop steward or employee representative and the supervisor.

The independent Chairperson shall:

  • Ensure that a record of the proceeding is kept;
  • Ensure that the enquiry is conducted in a fair and proper manner;
  • Give a decision on the matter, wherever possible, within two working days of the enquiry. The decision shall be recorded on the disciplinary report and a copy, signed by all parties, shall be made available to the employee and the shop steward or employee representative.
  • Ensure that the employee and the shop steward or representative are made aware of the right of the employee to appeal against any disciplinary action so implemented.

Level Five: appeal hearing

Any employee disciplined in terms of this procedure, but not dismissed, may appeal, in writing, to the next level of management, i.e. to the more senior supervisor or Manager than the one who implemented the disciplinary action.

In terms of the disciplinary procedure, any employee shall have the right of appeal to the company Director or his duly nominated representative.

The grounds of appeal against dismissal or disciplinary action shall be submitted in writing to the Manager or Director concerned within three clear working days of the disciplinary action.

The Manager concerned shall, as soon as possible, but within three working days of receipt of the appeal application, appoint a Chairperson to conduct a formal appeal hearing. The appeal hearing shall be conducted along similar lines to the disciplinary enquiry. The Chairperson shall, wherever possible within one working day of the appeal hearing, give a decision which will be final.

The disciplinary procedure and the grievance procedures fulfil different functions. Therefore, employee grievances against disciplinary action taken in terms of the disciplinary procedure cannot be channelled through the grievance procedure. Employees who have any enquires regarding the content of this procedure should approach their immediate supervisors or any senior Manager for advice and assistance.

These are complicated procedures to remember, and if companies do not have a specialised Human Resources or Legal representative, the company might find itself on the wrong end of the law and open itself up to legal action. A simple call to the SEIFSA Industrial Relations & Legal Services Division – which has the relevant expertise and experience – can resolve this situation.

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SEIFSA Legal Services Protecting Companies from the repercussions of unfair dismissals

SEIFSA Legal Services Protecting Companies from the repercussions of unfair dismissals.

One of the most important changes introduced by the Labour Relation Act 66 of 1995 relates to procedural fairness in dismissal. The unfair dismissal provision of the Act (Chapter VIII) and the code of Good Practice on Dismissal found in Schedule 8 to the Act (the Code) has attempted to provide greater clarity on unfair dismissals and has provided employers with a clear set of guidelines on procedural fairness.

The aim of this blog is to highlight the pre-dismissal procedure in the Code and showcase how SEIFSA assists employers to comply with these pre-dismissal disciplinary procedures when conducting disciplinary enquiries.

Labour Relations Act 66 of 1995: Unfair Dismissal

Section 185 in chapter VIII of the Act states that “every employee has the right not to be unfairly dismissed.”

The right not to be unfairly dismissed is supported by section 23(1) of the Constitution of South Africa. A dismissal will be unfair (section 188 of the Act) if the employer cannot prove that the reason for the dismissal was a fair reason and “that the dismissal was effected in accordance with fair procedure.”

Certain dismissals (section 187) are deemed by the Act to be automatically unfair, and should an employer dismiss an employee for any one of these reasons, the employee will not have to prove that the dismissal was unfair and the employer will not be provided the opportunity to prove that the dismissal was, in fact, fair. These would include an employee participating in a protected strike, reasons related to pregnancy and unfair discrimination.

Although Chapter VIII requires a dismissal to be effected in accordance with a fair procedure, it does not provide any definition of what constitutes a fair procedure and ultimately this is left to the guidance in the Code.

The Code of Good Practice: Dismissal

In an intentionally general manner, the Code of Good Practice on Dismissals provides a set of guidelines that requires employers to “take it [the Code] into account” (section 188[2] of the Act) rather than prescriptively to apply it. This has created the mistaken impression that there is no duty to follow these guidelines.  Management must exercise caution before departing from the norms set out in the Code and be prepared to justify fully any deviation.

Section 188 (2) of the Act clearly states that “any person considering whether or not the reason for dismissal is a fair reason or whether or not the dismissal was effected in accordance with a fair procedure must take into account any relevant code of practice issued in terms of this Act.” This means that an arbitrator will be required to determine the procedural fairness of a dismissal against the norms provided by the Code.

In any dispute arising from an alleged unfair dismissal, the onus will always rest with management to prove the fairness of any procedure that has been followed.

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Pre-dismissal disciplinary procedure

The Code of Good Practice on Dismissal (paragraph 4[1]) requires that under normal circumstances an investigation should be conducted to determine whether there are grounds for dismissal, and that this “does not need to be a formal enquiry.” What the Code envisages is an investigatory fact-finding – rather than an adjudicatory –  process.

The purpose of this process is two-fold. Firstly, it aims to ensure that employers make their decisions with the best possible information at hand. Secondly, it gives affected parties the opportunity to participate in the process, thus legitimising the outcome. Unlike an adjudicative process, it does not guarantee a correct decision, but what it does do is ensure a fair decision,  one made upon an objective consideration of all the information at management’s disposal.

Conducting a disciplinary investigation

According to paragraph 4(1) of the Code, management is required to conduct an investigation to determine whether or not there are grounds for disciplinary action.

This preliminary investigation is not the disciplinary enquiry. The investigative stage of the disciplinary process is an opportunity for management to determine what misconduct, if any, has been committed. If the investigation reveals a breach of rules, the next step is to compile a list of objective facts and evidence that will be presented at the enquiry.

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It is recommended that management conduct a PRE-DISMISSAL INVESTIGATION along the following lines:

  • Determine if there are any witnesses to the alleged misconduct;
  • Question each witness separately to obtain as much information as possible;
  • Request witnesses to make signed written statements;
  • Differentiate between factual evidence and evidence based on opinion or hearsay;
  • Decide whether sufficient factual evidence has been collected to proceed with a disciplinary enquiry; and

NOTE: This is not tantamount to finding the employee guilty. It simply enables management to make a decision on whether to convene a disciplinary enquiry or not.

  • Decide whether or not to proceed with a disciplinary enquiry.

This is a technical procedure, and that is why SEIFSA has two Admitted Attorneys to guide companies through this difficult process.

Management is required to notify the employee of the allegation using a form and language that the employee can reasonably understand. Employees are entitled to sufficient particulars to enable them to answer the case against them. Fairness requires that an employee be informed of the facts supporting the allegation, the alleged offence with which they are being charged and, importantly, the sanction that might be imposed.

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