Get life and funeral cover today

basketBuy online

10 signs your company is about to retrench

26 October 2020
4 minute read

Woman sitting at work stressed

There are usually a few warning signs that retrenchment is on the cards. None of these is definite and it is only when a formal Section 189 notice is handed to staff that you will know for sure your company is retrenching. However, it pays to keep a lookout for these signs, so you aren’t taken by surprise if retrenchments happen.

1. You’re asked to work fewer hours or take a pay cut

This might seem like an obvious sign of a business in trouble, but it’s tempting to hope that it is just temporary. It may be that there’s a plan in place and things do improve, but it’s certainly a red flag. If the business has already cut costs by asking staff to work less and for less, the company may have no alternative but to cut staff costs and retrench.

2. The business is going to restructure

Big and medium sized businesses often restructure to consolidate departments and product lines or to cut costs. Businesses also restructure when one company buys or merges with another. Restructuring often means retrenchments are on the cards.

3. The company automates

If your company is replacing people with machines and looking at new technology and artificial intelligence systems, some jobs will become redundant. There may be opportunities to reskill and move to another position, but in many cases automation results in at least some retrenchments.

4. There is a freeze on spending

This may be a freeze on hiring new staff, training courses, new marketing and advertising campaigns, even small items such as staff lunches or drinks. The more drastic these cost cutting measures are, the more likely the company is thinking about retrenching staff.

5. Salaries and suppliers are paid late

If your salary is paid late the business may be struggling to find cash to pay its bills on time and it may have to implement drastic measures. The same is true for delaying paying suppliers – if suppliers are complaining the business takes too long to pay the company may be in trouble and it’s possible that cost cutting measures, including retrenchments, will be implemented.

6. Budgets are revised

Companies often review budgets a few times during the year, but if an unscheduled budget review is called it may be a warning sign that things are not going well, and cost cutting may be imminent.

7. Companies in your industry are going out of business

If your entire industry is struggling and some of your competitors have already retrenched or closed, your company may be next to retrench. 

8. High-level departures and early retirements

While these are not uncommon, if you see a lot of executives departing and more people taking early retirement than you would expect, it can be a sign that a business is looking to reduce staff costs. Retrenchment could be the next step the business has to take, unless the economy improves.

9. The rumour mill is rife

Industry contacts tell you your company is in trouble and they’ve heard staff may be let go, your company is in the newspapers or rumours are doing the rounds on Twitter. It doesn’t always pay to believe rumours, but they often signal a problem is on the horizon.

10. The company is implicated in fraud and corruption

In the last year or two, we have seen companies (and state-owned enterprises) who were seriously implicated in fraud and corruption or accused of mismanagement either retrench staff or close.

What to do if you see the signs

Although there are warning signs we can spot, until there is a definite indication in a Section 189 letter, there is no guarantee retrenchments will follow the warning signs. And while you can speak to your boss, HR or union rep, they may not know, or be unable to give you a definite answer on retrenchments until it is formally decided by an executive committee. Nonetheless, it’s helpful to think about your options.

Know your legal rights around retrenchment

The Labour Relations Act stipulates the retrenchment process companies are required to follow in section 189 of the Act. This includes staff being formally notified when the company is thinking about retrenching staff and holding staff consultations to try and find alternative solutions. If retrenchments go ahead, there is a minimum retrenchment package retrenched staff must be paid that includes one week’s pay for every year worked. Some employment contracts stipulate retrenchment packages that are more than the minimum, so always check your contract if you are retrenched.

Don’t ignore the warning signs – always have an updated CV ready!

Prepare yourself for the job market

Don’t wait until you’re retrenched to update your CV, network with friends and colleagues to find out about job opportunities or pitch an idea for a new business venture.

Should you leave before retrenchment?

Deciding to stay or go can be a very difficult decision and one that you should discuss with your family or close friends. You will forgo a possible retrenchment package, but you will have the stability of a new job. Just make sure that if you do leave, you are leaving for a good job with decent prospects.

Be prepared so that you can focus on the future

In most cases, retrenchment is something you have very little control over, it’s related to factors beyond your control in the business or the economy. Nonetheless, it can leave you feeling inadequate, scared and despondent. Recognising the warning signs and being prepared for the possibility of retrenchments can be empowering, because you can start putting together ideas for how to move on to your next career opportunity, should your company start retrenching.

Enter your name and contact number and one of our consultants will call you back:

Please type in your name
Please type in a valid SA number
Please select what your query relates to
Call me back