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.
Predatory Employers
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
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relationship. Nothing on this article is intended to guaranty, warranty,
or predict the outcome of a particular case and should not be construed
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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
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