January PwC Research Services Survey on Retrenchment and Redundancy Practices

Transcription

1 on Retrenchment and Redundancy Practices

2 Contents Executive Summary

3 Executive Summary This survey has been prepared by Research Services for the purpose of providing market practice trends as it relates to retention and redundancy programmes. The findings indicate that enhanced severance packages are the norm with approximately 50% paying 2 weeks or more severance pay as opposed to the statutory 1 week minimum requirement. The most significant payment on retrenchment in addition to accrued leave is pro-rated incentive/annual bonuses (64%). The biggest cause of retrenchment is a decline in operations, with the top two retrenchment selection criteria based on skill requirements (57%) followed by last in first out (40%). Where retrenchment occurred due to the final closure of an asset, only 40% of companies utilised retention bonuses to ensure a competent and appropriately skilled workforce is in place until the asset s final closure.

4 view The nature of programmes in large-scale retrenchments is a result of consultations and negotiations and driven by the availability of financial resources. Research Services conducted a survey to investigate policies and practices in Southern Africa. Research Services To establish current market practices as it relates to retrenchment policies and practices in Southern Africa, Research Services conducted a research study aimed at the analysis of retrenchment policy and practices trends. s REMchannel Survey Over the past 14 years s REMchannel on-line survey has become the premier business tool utilised 365/24/7 by seasoned reward practitioners in their decision making process. The survey now provides market data for more than 1700 positions consisting of the analysed remuneration data for more than 85% of the top 100 companies in South Africa.

5 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Countries in which participants operate (more than one option could be selected) Angola Botswana Democratic Republic of the Lesotho Madagascar Malawi Mauritius Mozambique Namibia Seychelles South Africa Swaziland Tanzania Zambia Zimbabwe Other view The majority of participants have operations in South Africa, followed by Botswana, Namibia and Zambia. Countries in which participants have operations 95% in South Africa; 25% in Botswana; 21% in Namibia; and 20% in Zambia Countries specified under other included Mali, Ghana, Guinea, USA, Argentina, Brazil, Australia, Colombia, Egypt, Kenya, Uganda, Nigeria, UK, China, France, Germany, USA, Scotland, Singapore, India, Netherlands, Hong Kong, Canada, Moscow, Chile, Panama, Cote d'ivoire, Mali, Burkina Faso and Cameroon.

6 view Most responses were received from the Financial services industry, followed by mining and consumer goods. Industry Other Financial services Industries in which participants operate Financial services: 23% Wholesale/Retail Logistics and transport Mining: 18% Consumer goods: 9% Higher education: 7% Agriculture Manufacturing Higher Education Consumer Services Oil and Gas Mining Telecommunications Industrial Health Care Other Basic Materials Consumer Goods Technology Chemical and Petrochemical

7 Multi-national view A wide range of companies responded to the survey questionnaire Johannesburg Securities Exchange (JSE) Listed YES NO YES NO Business sector Listed on a public stock exchange Private Company Nature of companies Multi-national: 48% Listed on a public stock exchange: 39% Private companies: 48% Listed on the JSE: 33% Quasi government/state Owned Enterprise Government

8 Retrenchment in the last 5 years view The majority of participants retrenched staff in the past year with 74% retrenching in the past 5 years. Survey retrenchment results 74% of the participants had retrenchments in the last 5 years and 62% in the last 12 months. Retrenchment in the last 12 months YES NO YES NO

9 view The biggest cause of retrenchment was a decline in operations. Skills as a selection criteria is the most widely used, followed by LIFO. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 60% 50% 40% 30% 20% 10% 0% Reasons for retrenchment Decline in operations Disinvestment Closure of assets Termination of projects Other Retrenchment selection criteria Last in first out (tenure) Job level Job category/family Skills Other (please specify) Reasons for retrenchment The biggest reason for retrenchment was a decline in operations (51%); Followed by other reasons (44%) which included the following: restructuring of the business/centralisation of the operations and; cost savings, optimisation and efficiencies. 30% of the participants retrenched due to the termination of projects; and Only 9% of participants retrenched due to disinvestment. Retrenchment criteria The major retrenchment selection criteria was based on skill requirements of the company (57%); Followed by last in first out (40%). Other reasons for retrenchment included: Duplicate or redundant role; Initiatives to improve racial and gender and disability representation; and Under utilization.

10 Country of retrenchment 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% view The majority of retrenchments occurred in South Africa and our findings indicate that a consistent retrenchment policy is applied for various categories of retrenchment. Retrenchment policy 87% of the participants applied the same retrenchment policy to all categories of retrenchment Does the company have the same retrenchment policies for various categories of retrenchment Countries of retrenchment 98% in South Africa; 5% in Botswana; 2% in Namibia, Mozambique, Seychelles and Democratic Republic of the Congo YES NO

11 Severance pay in weeks per completed year of service view The majority of companies in the mining industry pays more than 2 weeks severance when retrenching, which is more than the prescribed 1 week. Severance pay in weeks per completed year of service The most common severance payments amongst the participants is 1 week per completed year of service (41%); More than 4 weeks per year of service 4 weeks Multiple policies 1 week 2 weeks Followed by 2 weeks severance pay (36%). 52% of the participants pay in excess of 1 weeks severance pay per year of completed service. 3 weeks 1 week 3 weeks 4 weeks 2 weeks More than 4 weeks per year of service Multiple policies

12 view Although the severance pay is typically more than the statutory minimum, 78% of participants only pay the 1 month s notice which is prescribed by law. Pro-rated bonuses are usually also paid. Notice pay Notice pay policy 78% of participants pay the equivalent of 1 month s pay as notice payment; 1 week 8% pay 3 months as notice payment; 4 months 3 months Other 1 week Other notice payments included: Per the notice period in the contract of employment (1 to 6 months dependant on level); and Some participants paying up to 5 months in notice pay. 2 months 1 month 2 months 3 months 4 months Other 1 month

13 view The majority of participants do not require their employees to work in their notice period. Staff members required to work in their notice period YES No Only 37% of staff members are required to work in their notice period.

14 view In addition to severance and notice payments, the majority of participants pay pro-rated bonuses. 70% 60% 50% Other payments made on retrenchment (in addition to accrued leave) Additional payments on retrenchment Other payments made on retrenchment, in addition to accrued leave included: o Pro-rated incentive bonuses /13 th cheque (64%); o Allowance for retraining (18%); and o Relocation allowances (9%) 31% of participants do not make any additional payments on retrenchment 40% 30% 20% 10% 0% Pro-rated incentives / bonuses / 13th cheque Relocation allowances / payments Allowance for re-training None

15 Were additional severance or notice payments made in the case of closure of assets view Most companies did not make additional payments when closing assets or upon termination of projects, with the channelling of financial resources to additional severance payments. Closure of assets/project terminations The majority of the participants did not make any additional payments in the case of or closure of assets; In the case of project terminations only 8% of the participants made additional payments. Were additional severance or notice payments made in the case of project terminations Yes No Yes No

16 Were retention bonuses paid to retain the workforce until the asset s final closure view Retention bonuses were paid in some instances and were driven by skills retention and continued employment. Retention bonuses 40% of the participants paid retention bonuses to retain employees until the final closure of the asset. Types of retention payments made upon closure of an asset noted were the following: Retention bonuses only paid to few selected individuals, based on their skills and experience; Quantum ranged from 8% to 150% of annual TGP. The nature of payment was generally upfront with repayment if the terms of the retention were breached. Yes No

17 view Assistance to staff is widely offered and ranges from assistance in work seeking, EAP s and re-skilling 80% 70% 60% Types of assistance to staff members upon retrenchment Assistance upon retrenchment The following types of assistance upon retrenchment were noted: 73% provided employee assistance programs; 55% of the participants actively assisted in seeking alternative work; and 42% assisted with the re-skilling of employees. 50% 40% 30% 20% 10% 0% Re-skilling Active work seeking Employee Assistance Programmes Relocation

18 The analysis and opinions in this discussion document are based on: The above facts and background information. If they are incorrect or incomplete please let us know as this may affect the analysis and opinions; and Our knowledge and interpretation of the relevant law and practice, which are likely to change over time. Such changes may affect the analysis and opinions. Accordingly, you should keep abreast of developments and, if necessary, again consult us. This report is for your exclusive use and purpose, as set out above. Copies may be made available to your other advisors provided that they use them solely for the purpose set out above and provided that they are made aware of the terms of this paragraph. Without our prior written consent, this report or any part thereof may not be made available to or copied to any other third party. In any event, we neither make any representations, nor shall we have any liability, including claims for damages of any nature, to any third parties or to your other advisors. The liability of us, PricewaterhouseCoopers Inc, and its subsidiary and associated companies and entities, and our and their employees, directors and agents, for any claims arising out of or in connection with the assignment dealt with in this report is limited to twice our fees charged for this assignment PricewaterhouseCopers Advisory Services (Pty) Ltd. All rights reserved. In this document, refers to PricewaterhouseCopers Advisory Services (Pty) Ltd, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.