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| Editor's Note |
In this edition, we look at a number of practical labour related issues our clients have experiences in the workplace including a valuable contribution from Kirsten Caddy at Cliffe Decker Hofmeyr on whether an employer can retrench based on poor performance.
We also have a thoughtful external article from the Foundation Fund Managers on the prospects of the Rand over the coming months.
We wish all our clients the very best leading up to the Municipal elections in early August and hope for a peaceful voting process.
As usual, should you require any further detail on any of these topics, please feel free to contact us.
Personal tax filing season started on the 1 July. If you would like our help preparing your return, please read the relevant section of this newsletter explaining how much it will cost and what you need to do.
We do offer a referral scheme for new clients sent in our direction so if you know of anyone looking for outsourced payroll services then please let us know*.
*Terms and conditions apply. |
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| Table of Contents |
1 Can one retrench based on poor performance?
2. What if an employee scheduled to work on a public holiday calls in sick?
3. Can employees bring weapons to the workplace for their personal safety?
4. COIDA - What happens when an employee is injured outside of South Africa?
5. Can an employer cancel leave which has already been granted?
6. The Rand - Risks & Opportunities
7. Contact HRTorQue |
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| 1. Can one retrench based on poor performance? |
| Author: Kirsten Caddy, Senior Associate, Employment, Cliffe Dekker Hofmeyr |
Editor's Note: This article showcases the risks of not getting good advice when making large scale changes to your employee base or conditions of employment. There are ways to achieve your objectives, but due process needs to be followed.
With retrenchments on the rise, it is important for employers to be aware of the risks associated with the selection criteria they apply in choosing which employees to retrench.
A question that comes up regularly is whether employers can retrench employees who are poor performers. Although this question has been previously considered, the Labour Court recently had an opportunity to revisit the question in Louw v South African Breweries (Pty) Ltd [2016] ZALCJHB 156.
In this case, subsequent to a restructuring at the employer, the employee's position became redundant. The employee unsuccessfully applied for a position in the new structure and after parties were unable to find a suitable alternative to retrenchment, the employee was dismissed.
The employee challenged the fairness of his dismissal and his main complaint was based on the inclusion of his performance rating in the selection criteria.
The selection criteria that was applied by the employer was as follows:
"...to select the best candidate for the job based on the top profile; taking into account skills, historically agreed performance ratings, qualifications and experience and thereafter length of service."
The employer took the employee's performance rating into account in assessing the employee's application for the position in the new structure. The success of the employee's application had an impact on whether the employee would be retrenched.
In terms of s189(2)(b) of the Labour Relations Act (LRA), the employer and other consulting parties must either agree on the method for selecting the employees to be dismissed or, if they cannot agree, the employer has the right to adopt selection criteria which is fair and objective.
The problem with including performance ratings in selecting employees for retrenchment is that performance ratings are, generally, not 'objective'. This is because it involves the scoring or rating of an employee's performance by their manager which entails the exercise of discretion. The exercise of a person's discretion includes an element of subjectivity. In addition, it brings into the selection criteria the element of fault on the part of the employee, in circumstances where retrenchments are regarded as 'no fault' dismissals in our law.
Our courts have previously held that productivity and conduct can be regarded as fair selection criteria provided that the affected employees are given the opportunity to challenge the assessment.
The employer argued that the inclusion of the performance rating was fair because the employee had not appealed against his performance assessment. In considering procedural fairness, the court found that the fact that the employee did not appeal against the performance rating was irrelevant as the employer was aware long before it formulated the selection criteria that the employee was unhappy with his performance rating. The court held that the employer should for this reason not have included the employee's performance rating into the selection criteria before allowing the employee an opportunity to be heard regarding his rating. This rendered the dismissal procedurally unfair.
Notwithstanding the authority that performance can be regarded as a fair selection criterion provided employees are given an opportunity to challenge the assessment, it remains a risk which may result in a dispute. |
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| 2. What if an employee scheduled to work on a public holiday calls in sick? |
| Author: Nicky Hardwick |
If an employee is supposed to work on a public holiday, but validly calls in sick, at what rate is an employer supposed to pay him/her (the public holiday rate or sick leave rate)? Should sick leave be deducted?
Section 22(5) of the BCEA requires an employer to pay an employee for a day's sick leave, the wage the employee would ordinarily have received on that day. This is the ordinary wage, meaning basic salary and not any of the premium payments e.g. Sunday or Public Holiday pay.
In addition, where this applies to the hospitality sector (and providing further guidance), S18(2)(a) of the Hospitality Industry Sectoral Determination (which supersedes the BCEA) states that if a public holiday falls on a day on which an employee would ordinarily work and they do not work on that day, the employee should be paid "at least the wage that the employee would ordinarily have received for work on that day".
From the above, an employee is entitled to receive the equivalent of one day's wage on the basis that the employee has not worked (either because of sick or annual leave) on a public holiday and the employee's payslip should reflect that the employee is being paid for the public holiday at a rate of 1 day. This is supported by S19(2) of the Hospitality Industry Sectoral Determination as it states that an employer "must grant an employee an additional day of paid leave if a public holiday falls on the day of an employee's annual leave on which the employee would otherwise have worked."
In conclusion, if an employee takes Sick or Annual leave on a public holiday, their balances or available leave days are not to be reduced and they are to be paid at a rate of 1 ordinary day with the public holiday being the reason. So they would only ever get a day's wages calculated on ordinary time. |
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| 3. Can employees bring weapons to the workplace for personal safety? |
| Author: Nicky Hardwick |
An interesting question...
In theory, this is a company policy issue.
In practice, the employer will then be required to provide adequate safe keeping facilities for the weapons to be stored while the employee is at work and one would imagine this may negatively impact insurance premiums.
In addition, in the event of the weapon being stolen or an incident arising at the workplace the employer will need to make sure adequate steps are taken to prevent any potential culpability or liability. |
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| 4. COIDA - What if an employee is injured outside of South Africa? |
| Author: Nicky Hardwick |
As an employer what are your obligations in terms of reporting and/or claiming for an Injury on Duty whilst duty outside the Republic of South Africa?
Chapter IV Section 23 of the Compensation for Occupational Injuries and Diseases Act refers to Accidents outside the Republic of South Africa.
In the event that an employee, who ordinarily works within South Africa has an injury on duty whilst on business in another country, that employee shall be entitled to compensation and therefore the employer must treat the IOD as per normal.
If an employee is employed to work primarily outside of South Africa then he or she would not be entitled to compensation unless the Employer has previously agreed this with the Director-General. |
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| 5. Can an employer cancel leave which has already been granted? |
| Author: Nicky Hardwick |
What happens when an employee has applied for leave, their manager has approved the leave and then operational circumstances change and the employee is required on site? Can an employer cancel the employee's leave?
In ordinary circumstances, an employer can (within reason) retract any leave based on operational requirements as leave is given at the employer's discretion. If an employee then does not arrive at work, depending on the individual circumstances (for example if he/she is sick), they could be disciplined.
From an ethical perspective however, the employer should consider the circumstances for the leave before cancelling and also the impact of cancelling on the employee.
For example:
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If the leave is important personally e.g. for an employee to attend his/her child's wedding then it would have very negative long term consequences for the employee's morale should the leave be cancelled; |
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If an employee has spent money on arranging travel and accommodation it would be inequitable to cancel the leave unless the employee is at the very least compensated for these expenses. |
In these instances, we would consider the smart thing to do would be for employers to carefully consider whether it is really necessary to cancel the leave. |
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| 6. The Rand - Risks & Opportunities |
| Author: Hadyn Little (Foundation Fund Managers www.foundationgrp.co.za) |
The Rand was stuck in one way traffic during 2015 as we lost approximately 30% of our value against the US Dollar. But, so far, 2016 has been more of a rollercoaster ride with pockets of Rand strength being countered by various setbacks, either through our own local doing (threats of arrest for Pravin Gordhan) or through international factors (plunging oil price, fears over China's economic health, the list goes on).
Whether you are directly involved in an import or export business, or simply wanting to stay abreast of inflationary pressures as a result of Rand fluctuations, it is worth taking a look into the back half of 2016 and what lies in store for our beleaguered currency. I must however stress that this is not a prediction of what will happen to that Rand, but merely an assessment of events that could have a certain impact should they transpire.
While newspaper headlines will have us believe that its all doom and gloom for the Rand, in reality there are potential opportunities that will help us strengthen against the major currencies:
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Brexit is actually a risk and an opportunity given that the actual impacts of this unprecedented event will not be fully understood until it has run its course. As an opportunity Brexit has created huge uncertainty in the market, and the knee jerk reaction is for investors to run to "safe havens", which include gold and gold shares. On Friday the 24th of June (the day after the UK referendum) R4.2bn of foreign capital flowed into SA in search of our bonds and gold shares, and over R22bn flowed in over the following week. This is the biggest weekly inflow since 2008 and demand for Rand based assets saw us surge from a low of R15.67 early on Friday morning to R14.84 by mid morning. Brexit is far from over, and as the UK and Europe muddle their way through some form of resolution we can expect the resultant inflow of investment capital as a result of uncertainty to boost the Rand. |
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The Rand dances to the tune of interest rates in the US, with any increase in Dollar interest rates attracting investment capital away from Rand based assets and therefore weakening the Rand. A combination of mixed economic data coming out of the States plus global uncertainty following hurricane Brexit has meant that the FED has effectively removed any further interest hikes in 2016 from the table, and in fact there is a small chance of a rate decrease. The FED meets in mid July, September and December and should US interest rates remain unchanged, coupled with soft statements on future hikes then the Rand should strengthen at those points. |
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Local inflation is already breaching the upper limit of 6% as set out by the SA Reserve Bank, with forecasts calling for 7.5% by year end. While unlikely given the Rand's recent recovery, our Monetary Policy Committee has the ability to increase local interest rates by 25 basis points which will make Rand based assets more attractive to international investors, and the resultant capital inflows would drive the exchange rate down. As mentioned, this is an unlikely scenario which would probably only take place if the Rand crept up to the mid R16/$1 mark therefore threatening to escalate inflationary pressures. |
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The final Rand "opportunity" is a bit of a long shot but worth mentioning none-the-less. In early June, Bloomberg switched their outlook on the commodities market from a bear to a bull run, this off the back of their commodity tracking index surging by 20% since January 2016. With stockpiles being depleted and supply constraints coming into play Bloomberg feels that a 4 year bear run could be behind us and commodity prices are set to increase. With Commodities making up 60% of our exports this would only be good for the Rand. |
So the opportunities are out there, but risks are lurking as well:
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As mentioned Brexit is both a risk and an opportunity, and the risk portion is also market uncertainty. While investors move to safe havens in times of uncertainty they also exit riskier assets. So while our gold shares benefit the rest of the JSE gets sold off and these capital outflows cause the Rand to weaken. While this point might seem contradictory to the first "opportunities" point above I can guarantee you that the Rand would have faired much worse post Brexit if we had no gold shares on our local exchange. |
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The 3rd of August sees our local municipal elections and if the violent scenes in Durban and Tshwane are repeated across the country, or if rigging is evident, then the international investment community will lose faith in South Africa causing the Rand to weaken. |
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October sees Pravin Gordhan deliver the mini-budget with credit ratings agencies paying close attention to our GDP performance as well as concrete evidence of structural reforms pulling through from the main budget tabled in February this year. We have already seen GDP come under pressure since Feb, and any unrealised reform promises will weigh heavily on the Rand. |
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On the 8th of November we have the US presidential elections and the race between Donald Trump and Hilary Clinton is too close to call. Depending on who you talk to both candidates will either be a massive success or failure so potential impacts on Rand are difficult to predict, but uncertainty is usually associated with Rand weakness. |
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December sees the next round of credit rating agency reviews with an overwhelming consensus amongst economists that a downgrade to junk status by at least one of the agencies is a certainty. Pravin Gordhan pulled a rabbit out the hat by avoiding a downgrade in June, whether he can do the double in December remains to be seen.
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So what does all this mean? In Foundation Fund Manager's opinion, the risks to the Rand outweigh the opportunities, particularly in the longer term as a downgrade to junk status would take years to recover from. Given that there will be pockets of Rand strength over the next 6 months we advise that any importers use these to book forward contracts, and any investors use these to build their positions in hard currencies. |
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| 7. Contact HRTorQue |
Head Office (Durban)
Phone: 031 564 1155 • Email: [email protected] • Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive, Durban North, KwaZulu-Natal
Johannesburg Office
Ground Floor, West Wing, 6 Kikuyu Road, Sunninghill, 2191 |
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