Achieving sustainable employment amid economic fluctuations

South Africa is currently experiencing a number of economic challenges, such as rising taxes
and increases in VAT, reduced foreign investment, and the struggles of state-owned entities.
We are also facing unpredictable external challenges, such as potential export tariffs (or at the
very least secondary effects of tariffs on our trade partners) and the possibility of losing funding
from agencies such as USAid. This is happening against a backdrop of global economic
instability, with factors such as geopolitical tensions, fluctuating commodity prices, and the
lingering effects of the COVID-19 pandemic all contributing to uncertainty.

Economic upheaval, together with policy changes and shifting market demands, makes
proactive workforce management crucial not just for labour law compliance, but indeed the
ultimate survival of any business. Companies need to ensure that their people strategies align
with business objectives and labour legislation in order to maintain stability, avoid legal risks
and protect both employer and employee interests. Three crucial strategies for achieving this
are ensuring that employment contracts are fit for purpose, having sound policies and practices
in place, and being staffed correctly to remain agile and responsive to the fluidity of the
economic environment.

Choosing the appropriate employment contract for any appointment is crucial in ensuring
flexibility and compliance with South African labour laws. Businesses need to make sure that
the terms of their contracts provide adequate protection to both employers and employees. For
example, permanent contracts, which offer job security and benefits, are better suited to longterm business needs. Fixed-term contracts, on the other hand, are ideal for project-based or
temporary roles, provided they comply with the Labour Relations Act (LRA) requirements, while
independent contractors can provide a business with greater flexibility. The latter reduces the
administrative burden and allows a business to scale up or down with ease, but requires clear
distinctions to avoid risking disputes or penalties.

Well-defined employee policies and procedures are integral to sustainable business practices.
Clear policies guide a variety of labour relations aspects, such as workplace conduct, dispute
resolution and performance management. It is crucial that companies develop and maintain
comprehensive HR policies that align with labour legislation. They should also regularly update
procedures to reflect changes in employment laws and business needs. In addition, using clear
communication and suitable training helps to ensure that employees understand the
company’s policies, while fair disciplinary and grievance procedures can mitigate risks and
foster a pleasant and productive work. Sound policies, specifically grievance procedures, also
encourage employees to resolve matters internally, rather than escalating to external bodies
such as the CCMA or labour department.

During economic downturns, the spectre of retrenchment often raises its ugly head. Should
retrenchments become unavoidable, it is critical to follow the correct legal procedures to
ensure fairness and compliance with South African labour law. Key steps that need to be taken
in such a case include issuing the notice prescribed by Section 189 of the Labour Relations Act,
engaging with employees and trade unions, using objective and justifiable criteria for selecting
employees to be retrenched, and ensuring compliance with statutory severance pay and other
entitlements.

It is worth remembering that businesses are legally obliged to consider possible alternatives
such as reduced hours, temporary layoffs, or reskilling before proceeding with retrenchments.
The most important part of a Section 189 process is to issue a proper notice of intention to
retrench and to engage in meaningful consultations before making any final decision. The most
common procedural defect with these processes is where companies have already decided to
retrench before heading into the process.

The reality is that South African labour legislation is complex and continually evolving, and
failure to comply carries the risks of costly litigation, financial penalties, and reputational
damage. Sustainable employment practices are essential for business resilience amid
economic fluctuations, and by familiarising themselves with legislation and getting expert
guidance, companies can safeguard their workforce without risking non-compliance.

Remember that compliance requirements are not draconian – by simply following a proactive
approach to labour law you can ensure that your business remains agile, legally sound, and
prepared for whatever challenges the unsettled economy may bring.