The Kenyan economy has over the last couple of years suffered numerous shocks such as the global economic and financial crisis and high inflation rates. Organizational restructuring can be considered inevitable for any company to survive with the changing times.
Restructuring employment-wise is vital yet very risky as numerous issues can result from the same. There are however ways a company can go about the same without lighting too many fires.
Who stays and who goes?
Tough times can result in nervousness around the work place. Employees begin to worry if they are going to be retained or laid off. Companies will need to look at the length and value of the service offered by the employee. These two grounds are also provided for under Section 40 of the Employment Act when determining which employee contracts to terminate on the grounds of redundancy.
Employers can assume that the employees they want to retain want to continue their service with the company and end up being wrong. Then at the end of it the company may then be left with no key employees as they have either been fired or they have been poached by predatory employers.
Keeping company secrets secret
With the exiting employees, depending on their level of employment, whether or not they have signed a confidentiality clause is a big issue. Another issue is whether they will stick to this clause even after termination of their contract. Some employees, if they feel their contract may have been terminated unfairly, can give vital and confidential information to a competitor as an act of revenge.
Although it may be termed as “jumping the gun”, the employer must provide certain clauses such as confidentiality clauses for high level employees in the employment contract to prevent any risk that may result when it is terminated. For example, a non-compete clause will prevent a former employee from working for another employer in the same sector for a certain period regardless of how their employment was terminated.
If the Company provides employee handbooks, the same can also provide for termination. The handbook should define and set out the grounds for termination so that the employee is notified what acts may result in their dismissal.
The Employer should also ensure that the termination was conducted in accordance with the law. This will ensure the employer is not accused of unfair termination. Termination without giving due notice and also non-payment of salaries owed are some of the issues that arise when laying off employees. Africa Nazarene University employees took it to court and accused it of not following the due process as provided for under Section 40 of the Employment Act and serving them a notice of redundancy1.
Employers, especially from rival industries, tend to woo talented employees in troubled companies with attractive job offers that are welcome for employees facing the risk of unemployment. Given the fact that employers cannot prevent employees from leaving the service, they may end up losing a lot of vital employees that they may have wanted to retain.
The employer should allow the employees to leave voluntarily. Understanding the needs of the employees may be difficult but will help the employer understand and develop effective solutions to deal with them. The employer can also go a step further and offer the employees a form of additional compensation such as an advance of three months’ pay to assist them while looking for other jobs. The employer should also, where possible, notify those employees that they have decided to let go in advance so that they can prepare themselves and commence job seeking.
Wages versus Debts
Sometimes the debt owed by the company is considerably large and the company is forced to redirect funds from payment of salaries so as to settle the amount. An employer is obligated by law to pay employees their wages for the work done. While trying to stay afloat, the company can come up with a system for payment of salaries which will work for the employer and employee. Nakumatt came up with such a system in its financial crisis that reviewed the method of salary payments. However, the plan failed as the company was still unable to pay the salaries through the new system. A company should therefore come up with and implement a system that can work in the long run for the company.
For laid off employees, the employer must provide them with a severance pay as laid out by the Employment Act. Wananchi Group Holdings employees affected by the restructuring of the company received a severance pay calculated at 15 days for each year worked, ex-gratia pay of one month for every year worked, accrued leave days untaken, and terminal benefits from the company’s pension scheme.
In conclusion, restructuring should be looked at as a way of changing the vision of the future of the company and not as a punishment for its current employees. As it undergoes the process of restructuring, the employer and the retained employees must adapt to the organizational changes so that they can evolve as well.
Article written by: Carole Ayugi, Managing Partner, MMAN Advocates
Disclaimer: This article has been prepared for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Nothing on this article is intended to guaranty, warranty, or predict the outcome of a particular case and should not be construed as such a guaranty, warranty, or prediction. The authors are not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. Readers should take specific advice from a qualified professional when dealing with specific situations.