Helmut Angula, who is the country’s second finance minister, a founding member of the National Assembly and the current Swapo Secretary for information and Mobilisation, will be sharing his wealth of understanding on the history and future of Namibia’s State-owned enterprises (SOEs), to give our readers an insight into the unfolding conundrum around these entities. This is the last part of a series of articles that Confidente published.
By Helmut Angula
(3) Retrenchment in Namibian law
Retrenchment is defined as the act of dismissing an employee from a job. Such dismissal may be a function of various factors, such as changes in technology, reduction in the scope and activities of a business, redundancy, and so forth. In Namibia, issues related to the dismissal of workers from employment are regulated by the Labour Act, 2007 (Act No. 11 of 2007). For starters, it is important to point out that the Labour Act does not employ the term ‘retrenchment’. It rather refers to terms such as termination of employment or dismissal of employees. Be that as it may, retrenchment, termination of employment and/or dismissal all have the same effect. At the end of the day, someone loses a job and livelihood. Section 34 of the Act is the authoritative legal provision on matters of dismissal or retrenchment, which Namibian employers should heed. It is titled ‘Dismissal arising from collective termination or redundancy’.
It provides that where or when an employer contemplates dismissing employees, and the reason for such intended dismissal is the reduction of the workforce, arising from the re-organisation or transfer of the business, or the discontinuance or reduction of the business for economic or technological reasons, an employer must inform the Labour Commissioner and the recognised trade union at least four weeks before the intended dismissals or retrenchments are to take place. Where there is no recognised union, information should be given to the workplace representative elected or chosen by the workers in terms of the Act. Whether employees at many businesses in Namibia are aware of and have been permitted to exercise their democratic right to choose their workplace representatives is a question for another day. In cases of intended dismissals, the Act obliges all employers to provide the following information to the Labour Commissioner and to the union or workplace representative:
(i) The intended dismissals;
(ii) The reasons for the reduction in the workforce;
(iii) The number and categories of employees affected; and
(iv) The date of the dismissals.
Not only are the employers required to provide the information, as above, they are also obliged to disclose all relevant information necessary for the trade union or workplace representatives to engage effectively in the negotiations over the intended dismissals. This means that the list above is not a closed one. Furthermore, employers are required to negotiate in good faith with the trade union or workplace union representatives on:
(i) Alternatives to dismissals;
(ii) The criteria for selecting the employees for dismissal;
(iii) How to minimise the dismissals;
(iv) The conditions on which the dismissals are to take place;
(v) How to avert the adverse effects of the dismissals; and
(vi) The selection of employees, according to selection criteria that are either agreed or fair and objective.
The principle of good faith is sacrosanct in negotiations, because without it, fairness and objectivity become impossible to achieve. Without it, the labour relations equilibrium is disturbed and the result is labour unrest and its negative consequences for the employers, the workers, the national economy at large and even potential threats to national security. Our constitution places the principle of fairness at the centre of administrative actions, and this includes decisions to dismiss or retrench workers. It must therefore be adhered to at all times without fail.
(4) The Position of SWAPO on retrenchments by SOEs
In the introductory sections of this essay, we laid out the rationale for the establishment of SOEs in Namibia. This was a conscious decision by the SWAPO Party. Our point of departure is that SOEs were created to fulfil certain objectives. These include strengthening the economy, growing the industrial sectors in which they operate, strengthening specified strategic areas, improving service delivery, especially in less attractive or non-marketable remote areas, where private business are hesitant to invest, and yes, creating and sustaining employment for the Namibian people. In other words, SOEs are not only supposed to create employment, they are supposed to sustain such employment. It stands to reason that unchecked retrenchments are inimical to the concept of sustainable employment. The position of the SWAPO Party vis-à-vis retrenchment and dismissals by SOEs is, therefore, self-evident. There are thousands of Namibians, especially the youth, who are roaming our streets looking for work. Should our SOEs retrench workers, without considering other options; this will aggravate the already difficult unemployment situation in the country.
It is unfortunate and regrettable that some of political leaders, particularly those in the opposition, as well as some managers and directors of Namibian SOEs, have become, for a lack of better expression, trigger happy to dismiss workers, without due regard to the prevailing economic and social circumstances. They appear to have lost sight of the original intent of why SOEs were created. Comfortable in their air-conditioned offices and enjoying the benefits of generous conditions of their employment, they show scant regard of what impact on families and individuals their decisions, by a stroke of a pen, will visit upon those unfortunate workers at the bottom of the rung. It is rather shocking that in some instances, there is simply too much readiness, in fact eagerness, to dismiss workers, without considering other alternatives or options. The fact of the matter is that SOE managers need to show greater care towards the well-being of their employees. Unlike the managers who have more choices and may be recruited faster into new jobs, because of their qualifications and visibility, other workers are not so fortunate and are likely to be condemned to the life of joblessness and poverty, once they are retrenched from the one job that they may have known in their lives. This stands contrary to SWAPO Party’s humanistic stance, as well as the generous guarantees of human rights entrenched in the Namibian Constitution.
Retrenchment has another negative consequence, namely the creation of antipathy towards the SWAPO Party government. This is not a situation that the SWAPO Party wants to see arise, because it is tantamount to shooting oneself in the foot. Human beings are human beings. It is a natural reaction, which cannot be denied, that the loyalty and goodwill of a retrenched worker towards the SWAPO Party and the government will diminish. In consequence, diminished goodwill towards government compromises peace and stability in the country. Therefore, SOEs managers should be aware at all times that their actions can reverberate at the macro/national level, with grave policy and even political consequences.
The SWAPO Party understands the market and industry dynamics within which our Namibian SOEs operate. We understand that the regional and global economies are facing headwinds and that there are many extraneous factors that local companies have to contend with. However, Namibians cannot fold their hands and resign themselves to some fate. We have to be innovative and find new and effective ways to confront and address the unfolding realities. Not only do policymakers, company executives and managers have to think out of the box, they have to think as if there is no box. There are many examples of success that we can learn from and benchmark against. We must never be too shy or obstinate to do that. The following section discusses alternatives to retrenchment.
(5) Proposed alternatives to retrenchment by SOEs
Due to prevailing economic conditions, a company may retrench workers. But, the question to ask first is this: Is retrenchment always inevitable? Lessons from around the world teach us that the answer to that question is no. Retrenchment is neither always the correct remedy, nor is it always the only alternative. In fact, many options do exist and have been applied as ways to forestall retrenchment. Namibian employers and more specifically the SOEs, which are subject of discussion in this essay, would be best advised to acquaint themselves with what other companies around the world have done to avoid retrenchment, and to apply that only as a measure of last resort.
In Singapore, the Ministry of Manpower has introduced the term ‘responsible retrenchment’. It is based on the principle that in the event that retrenchment becomes inevitable, the tripartite partners, namely the government, trade unions and employers, work together to help companies implement potential retrenchment exercises in a responsible and sensitive manner, bearing in mind the impact on the affected employees. It recognises and emphasises that retrenchment is a difficult time for all, especially the employees affected and their families. Thus, employees should be treated with dignity and respect during a retrenchment exercise. Generally, invariably retrenchments are motivated by and are carried out as cost-saving interventions. There are various possible cost-saving measures to save costs and manage what may be considered excess staffing. These measures are discussed below:
5.1 Redeploy workers to alternative areas of work within your organisation or other SOEs
Employees can be redeployed or rotated when the job scope is enlarged, enriched or restructured. It should be a policy that when there is no other available jobs for them within the organisation, companies can consider outsourcing the affected employees to suitable jobs in other companies, including other SOEs, taking into consideration their physical and mental condition, skills and experience. Employees who are redeployed should also be provided with the relevant training. This is possible through effective operations under the tripartite system.
5.2 Shorter work week, temporary layoff or other work arrangements
Workers and trade unions (if workers are unionised) should be consulted on the implementation of a shorter work week, temporary layoffs, flexible work schedules or other flexible work arrangements, in any appropriate order, as well as the level of payment to be given to the affected workers, taking into consideration the performance and financial position of the company.
Shorter work week:
•Request your employees to take up to 50 percent of their earned annual leave.
•Implement the reduction in the work week, such that it does not exceed three days in a week and does not last for more than three months at any one instance, subject to review.
• Pay the affected employees not less than half of their salary on the day(s) when the employees are not working, during the period when the shorter work week is implemented.
•Request your employees to take up to 50 percent of their earned annual leave.
•Implement the layoff period, such that it does not exceed one month at any one instance, subject to review.
•Pay the affected employees not less than half of their salary during the layoff period.
5.3 Part-time work, sharing of jobs and flexible work schedule
Companies may also consider implementing other work arrangements, such as part-time work, sharing of jobs and flexible work schedules, in consultation with the union and workers concerned. Companies may implement them in any particular order, depending on the operational needs and the severity of the downturn.
In Singapore, the Employment Act (EA) allows companies to implement the Flexible Work Schedule (FWS) to optimise the use of human resources. Companies could make applications to the Commissioner for Labour (the counterpart to Namibian’s Labour Commissioner) to be exempted from the Employment Act (equivalent to Namibia’s Labour Act) provisions on overtime payment, pay for work on rest days and public holidays, provided that certain conditions, including the safety and health of workers, are met. Applications should be made with the support of workers and unions (for unionised companies). The above-mentioned measures may be more suitable for rank-and-file workers and less applicable to executives, particularly senior management.
5.4 Flexible wage system
Companies may introduce flexible wage systems. If a company has a flexible wage system in place, and a reduction in manpower costs is required to avoid retrenchment, such a company may consider adjusting the various wage components in consultation with the union or workers concerned. The various wage components include:
5.4.1 Variable bonus payments
This is the first component to be cut during a business downturn, as the payment is directly linked to the company’s performance. The continuation of such a payment will depend on the profitability of the company. Hence, when a company is not performing well, bonus payments will be reduced or not given.
5.4.2 Annual wage increment
If the need arises, the company may also consider reducing the annual increment or introducing a wage freeze, if the situation warrants it. The extent of this intervention depends on the company’s financial position.
5.4.3 Monthly variable component (MVC)
The MVC exists in some jurisdictions. It forms a part of the basic wage and allows the company to adjust wages quickly, in response to changes in the business environment, without having to wait until the end of the year to adjust variable bonus payments and other annual variable components.
If a company implements an MVC, it can consider adjusting it downwards. The extent of the adjustment would depend on the severity of the downturn, the company’s situation and any key performance indicators or guidelines for triggering an MVC cut, as agreed with the union or workers.
For a company which has not implemented the MVC but needs to adjust wages downwards, the company could consider treating any cut in basic salary of up to 10 percent (for management staff, it could be more than 10 percent) immediately, as an MVC cut. The company should set clear guidelines to restore the MVC cut through future wage increases or adjustments, when their businesses recover. In the case of managers/executives, depending on the circumstances and requirements of the company, the MVC set aside could be more than 10 percent of basic wages. This is in line with the principle of leadership by example. The company should consult their workers and explain the reasons for the MVC cut. If the company is unionised, it should seek the agreement of the union. The MVC could also be used to provide for equity in the company, especially for employees at management level, whereby such employees could become owners in non-tradable or restricted shares in the company.
5.4.4 Annual wage supplement (AWS)
If business conditions continue to worsen, another component to be considered for reduction is the AWS, which is usually one month’s salary to be paid at the end of the year. The adjustment of the various wage components need not be applied sequentially, as listed above, and companies, in consultation with their workers or the union, have the flexibility to implement them in any particular order, depending on the financial situation of the company and the timing in which it is adjusted.
5.5 Other cost-saving measures
The tripartite partners recognise that some companies may have to implement more severe cost-cutting measures, in addition to measures such as a shorter work week and temporary layoffs. These companies may have to consider implementing no paid leave, in order to survive and to save jobs in a prolonged downturn.
In implementing no paid leave, companies should have considered/implemented other measures, and after consulting workers and unions (if the company is unionised). Companies should recognise the impact of no paid leave on rank-and-file workers, in determining the extent and duration of the measures. Senior management should lead by example, by accepting earlier and/or deeper cuts in cost-cutting measures. If business conditions warrant it, companies could apply no paid leave in conjunction with other cost-cutting measures. During the no paid leave period, management should also arrange in-house or external training for affected workers, to help upgrade their skills and employability, for the benefit of both the workers and the company in the long-run.
(1) The way forward
It is a socio-economic fact that businesses face challenges in their operations, which may necessitate retrenchments or the laying off of workers. However, in such situations, due care must be taken and no rushed decisions or actions should be taken to retrench workers. There are always alternatives. Consideration of such alternatives should be based on the original intent of government to create SOEs. The imperatives of employment creation, service delivery and economic growth must be uppermost in the minds and thought processes of those who are charged with the task of managing and directing our SOEs.
There are many best practices that Namibia can learn from, in terms of making sure that our SOEs fulfil their respective mandates. Management rigidity is not the answer. We need more flexibility. The position of the SWAPO Party is clear as daylight, that all alternatives must be exhausted to secure the long-term sustainability of our SOEs, and put them on a sound footing to contribute to nation-building. Namibia should not, and cannot afford to shoot ourselves in the foot. SOEs were created for a purpose. It is the duty of all those charged with the task of managing and directing the operations of these entities, to make sure that the task at hand is fulfilled successfully. There should be no excuses or equivocation.
*Helmut Angula is the Swapo Secretary for Information and Mobilisation. This contribution will continue in next week’s editio
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