How to avoid retrenchments

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How to avoid retrenchments

Your company is losing money. Management see retrenchments as the appropriate response. What alternative cost reduction strategies can you suggest?

Nerine Kahn, Director of the CCMA was reported in the media this week expressing the opinion that the financial crisis does not have to translate into job losses.

Kahn told the Business Day that business and labour should be committed to working together and to coming up with workable plans to avoid retrenchments.

The International Labour Organisation (ILO) warned last month that up to 51-million jobs could vanish because of the global financial crisis, and in SA retrenchment estimates are anywhere between 35000 and 250000.

However Kahn explained to the newspaper that the CCMA assisted a mining company that was considering retrenching 495 workers.

An agreement was reached under the auspices of the CCMA in which trade unions agreed to work an additional shift every month until December 19 to avoid retrenchment. In addition, the mine agreed to reduce contract labour and to replace contractors with permanent employees.

We suggest that companies create cost reduction teams responsible for collecting suggestions, monitoring and reducing costs.

Increase income

  • Ensure that the maximum Seta levy refunds are being received
  • Investigate all discretionary grants which are available from your Seta
  • Are there any state subsidies or grants that your company should be benefitting from?

Payroll costs

  • Defer or cancel discretionary payments such as bonuses
  • Consult with employees - at all levels - on how to reduce payroll costs
  • Is it possible to defer pension or provident fund contributions for a period?

Do you have overtime or shift working?

Consult with employees to:

  • change working arrangements
  • stop overtime working
  • change or reduce shift patterns
  • reduce shift allowances.

Human Resource allocation

  • Freeze all recruitment for vacant posts
  • identify employees who may be retrained to fill vacant posts
  • reduce the use of consultants
  • reduce all casual labour
  • re-deploy employees from indirect support positions to positions directly related to production operations and sales.

Examples of common sense cost reduction exercises:

  • reduce electricity by switching off air-conditioners, electric lights, and electrical appliances, most companies still leave meeting room lights and air-conditioners on even though the meeting room is not being used, and office lights after-hours are still a common sight
  • hot water in office kitchens and cloakrooms - is the water supplied by a geyser and has the temperature been reduced?

  • reduce stationery costs - simply stop issuing stationery, all companies have employees that keep their own stock in their cupboards and drawers, encourage employees to share stationery
  • telephone and internet costs - monitor useage closely and encourage employees to reduce costs
  • company vehicles - review useage, plan routes more carefully, encourage drivers to travel at under 10 km per hour

Review business operations.

  • What are the raw materials/input costs for the business?
  • How can these be reduced by finding alternative sources of supply or replacing them altogether?
  • Identify the top 20% of items that account for 80% of the your procurement costs
  • Set up a procurement initiative to concentrate on reducing the cost of the 20%.
  • Review your business operations - are there products or services that are no longer viable?
  • Could these products or services be sold, or set up as businesses that employees can take over and become suppliers to the company?

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