Davies Ndumiso Sibanda
FOLLOWING the amendment of the Labour Act there is a lot of confusion over who is entitled to get a retrenchment package.

The Labour Amendment Act went against settled practice and Labour Laws applicable all over the world and extends retrenchment package rights to termination of contracts that would have ordinarily not attracted a retrenchment package.

Employees on fixed term contracts are now entitled to a retrenchment package at the end of their fixed term contracts.

What this means is that, if Peter was on fixed term contract for three months at the end of three months he is entitled to his salary, cash in lieu of leave if he did not take leave and a retrenchment package calculated on a pro-rata basis using the formula of one month salary for every two years worked.

The Amendment Act also extended retrenchment package rights to employees who have been dismissed or mutually separated with the employer.

Effectively this means that Moyo who is five months from retirement and has served the company for 50 years can deliberately commit dismissible misconduct with the hope of being dismissed so as to be paid 20 months’ salary, a thing that is much better than retirement where Moyo will go home with his pension only. The question that arises is whether this was the intention of the legislature.

An employee who steals and is sent to jail for seven years is also entitled to his retrenchment package.

Many employers are up in arms over this law.  Some have refused to pay and workers are litigating, we wait to get direction from the courts.
Employers argue it is unjust and workers say it’s fair as the payment is for service and has nothing to do with the misconduct.

Further the Amendment Act does not define mutual separation. It can be a tricky thing for employers.

For example an employee who resigns and requests to be released earlier and the employer agrees, is this mutual separation?

Mutual separation is likely to be another legal minefield to be decided by courts.  It could lead to employers rejecting mutual separation preferring leaving workers to resign.

The fact that these payments have been termed “retrenchment packages” it means they have to be processed through the Retrenchment Board.  I am not sure whether the Retrenchment Board has the capacity to process all terminations.

However not all cases will smile all the way to the bank as employers who have no capacity to pay these packages are applying for exemption from paying.

Employers however need to be careful as the application process is not just pushing through a letter, there are legal processes which have to be walked past.

In conclusion retrenchment package availability depends on a number of things as while automatic in specified cases, employers may apply for exemption from paying and if the exemption is granted the workers can go home empty handed.

Finally the process of terminating employment contracts is now very expensive employers need to think twice before terminating contracts.

Davies Ndumiso Sibanda can be contacted on: email: [email protected] 
Or cell No: 0772 375 235