EDITORIAL COMMENT: Lay-offs not always the best option

retrenchmentGovernment should be saluted for tightening screws on retrenchment regulations by making it difficult for firms to simply throw hapless employees onto the streets in the name of cutting costs.

We have observed that the majority of companies that have retrenched have not done so just to reduce costs, but to ring-fence chief executives and top managers’ earnings and other perquisites.

Indeed we say kudos to Government for tightening retrenchment regulations so that workers are protected at the shop floor.

An unholy alliance between board members, chief executives and their managers was threatening to flood the country with retrenchees.

Why is it that when firms are faced with operational challenges, it is the low-grade worker who is usually at the receiving end?

He is made to suffer most and yet in many instances, the managers would have failed to put in place systems to increase viability.

When board members and chief executive officers go on retreat, it will be the hope and belief of workers that key decisions will be taken to bring more profits for the firm, better salaries, profit sharing and bonuses.

But shockingly, these retreats have spelt doom for workers as sad news of retrenchment or whittling of workers benefits are taken as ways of saving the company. Of course we do appreciate the fact that the current economic environment has meant the survival of the fittest as firms face challenges such as lack of capital to recapitalise.

Many producers have seen markets for products dwindle as disposable incomes are eroded while others have succumbed to the influx of cheap imports. But these challenges demand that firms think outside the box to remain afloat or even operate viably. The easier route for most of the firms has been to retrench and yet this is not the best possible solution to operational challenges.

A firm that is a good corporate citizen should not be quick to show employees the door, but should strive to come up with measures to operate viably. Of course there are instances when cutting down staff is the only viable route. Such cases should be thoroughly vetted and given the green light. There are firms where the staff to turnover ratio is too high which means retrenching staff will be inevitable.

However, everything possible should be done to minimise job cuts. A soft-landing should also be provided in cases where retrenchment cannot be avoided. In this vain, we also call on managers to follow tenets of good corporate governance, where when things go wrong at a firm, top managers must be the first to forgo some of their huge perks and desist from sacrificing low-grade workers.

We also suggest that all employment contracts for top managers must be performance-based so that no one claims huge exit packages from a company that they would have failed to lead.

Remuneration of board members and other perquisites should be monitored to avoid a drain of the company’s resources towards the upkeep of people, some whom will be responsible for the collapse of the firm. There must be a balance between executive and non-executive board members to block the creation of an unholy alliance between the former and the chief executive officers that poison the performance of the firm.

There is also a critical need for companies to employ managers who seek to grow companies by investing more resources in production rather than those schooled to shrink the company by retrenching workers as a way of saving money.

Above all, the country should adopt zero tolerance to corruption because many firms have collapsed as they fail to finance production while funding corrupt activities by chief executives and their cronies. Government should be supported for demanding salary structures of executives and management and allowances paid in cash and otherwise that have been used as conduits of siphoning untaxed benefits.

Government should also demand how much will be saved by retrenching workers and how long the firms would take to recoup the funds used to fund retrenchment before it returns to profitability.

The social cost of retrenching should also be considered before people are thrown onto the streets. Government has often been forced to look after people who spent years working for firms that ditched them at the last minute.

A more sensible approach is needed when handling the sensitive issue of retrenchments.