COVID-19 and the Implementation of Short-Time

The sudden emergence of the COVID-19 virus and the need for hasty government regulations have caused unprecedented issues for South African employers.   For many employers, the prospect of massive reductions in revenue and even temporary closure are real and daunting. What follows are guidelines for dealing with the employment issues arising from those challenges.  

There is no doubt that employers first response to this crisis should be to safeguard the health and safety of their employees and follow appropriate medical advice. Where possible, remote-working and access to paid leave should be considered.

Whilst all responsible employers will address the medical challenges of the virus, for many employers, they are also faced with the threat that the very existence of their organisation is at stake. Businesses in the travel, hospitality and event management industries are examples of those hardest hit.

Short-Time

Some employers operate in industries where applicable industrial instruments allow for the implementation of temporary short-time, meaning a reduction in working hours / days, with a consequent reduction in employee remuneration.    

These industrial instruments can take two forms.   

Firstly, Sectoral Determinations may include rights to implement short-time. Sectoral Determinations are Gazetted notices issued by the Minister of Employment and Labour, pursuant to section 58 of the Basic Conditions of Employment Act 1997.   The contract cleaning and civil engineering sectors are examples of industries in which employers have a legislative right to implement short-time.   

Secondly, many employers operate in industries where there is a Bargaining Council that has implemented a Collective Agreement and frequently, these Collective Agreements entitle an employer to implement short-time. Employers operating within the metals, clothing and electrical industries all have an entitlement to implement short-time.

As a result, it is imperative that employers seeking to limit the business risks associated with the COVID-19 virus should determine whether their industry permits the implementation of short-time.

For employers without such an entitlement, the use of short-time is not as clear. What is clear, however, is that section 189 of the Labour Relations Act 1995 obliges employers to consider alternatives before implementing employee redundancies. Short-time is one such alternative and in instances where there is a sudden but potentially temporary need to reduce remuneration costs, short-time should be seriously considered.

For these employers – not bound by Sectoral Determinations or Collective Agreements – is it difficult to say with certainty what rules apply.

In our view, the extent of the short-time should be as limited as much as possible, say no more than 50% of hours / 50% of remuneration, assuming there is any work for the employees to do. We also suggest that the length of the short-time should be curbed, say no more than three months. After this period, employees should be able to opt for redundancy and the payments that follow from redundancy, although this is likely to place strain on the financial resources of the business any many employers may not be able to meet their obligations to make the payments that arise due to redundancy.

We also recommend that employers urgently commence consultative discussions with employees, with a view to obtaining at least majority consent for the implementation of short-time.

There is no doubt that short-time places significant hardship on employees. It does, however, offer prospects for retaining their employment at the end of the COVID-19 crisis; allows for time to spend with family members at a time when schools are closed and will result in reduced transport costs, which are often heavy financial burdens for employees.    

Some employees are also likely to fall within a lower tax bracket given the reduction in their remuneration, such that their net salary may not suffer the same rate of reduction as their gross salary.

Employers should also explore the possibility of employee benefits from the Unemployment Insurance Fund, including the Department of Employment and Labour’s Reduce Working Time claim (UI-2.7 form) and Temporary Employer / Employee Relief Scheme (TERS).

For more information on these issues, kindly contact Workplace Strategies at info@workplacestrategies.co.za.