Retrenchment and Redundancy

What is the difference between retrenchment and redundancy? What are they and what do the terms mean in the workplace?

What is retrenchment?

Retrenchment usually involves a reduction of the workforce due to an economic downturn.

What is redundancy?

Redundancy involves a reduction of positions as a result of a number of factors, including restructuring due to an economic downtrend or due to technological reasons.

The biggest difference between the two is that retrenchment targets people, whilst redundancy targets positions.

A person cannot be declared redundant but a position which a person is holding can be declared vacant. 

Confusion 

It is possible to declare one position redundant and therefore only one employee loses his or her job. But it is unlikely that only one employee will be retrenched – usually retrenchments affect a number of people at the same time.

Dismissal

An employee who is dismissed is taken to be dismissed by reason of redundancy or retrenchment if the dismissal is wholly or mainly attributable to:

• The fact that the employer has ceased, or intends to cease, carrying on the business for the purpose of which the employee was employed by him, or has ceased, or intends to cease, carrying on that business in the place where the employee was so employed.
• The fact that the requirements of that business for employees to carry out work of a particular kind in the place where they were so employed, have ceased or diminished or are expected to cease.

To declare retrenchment or redundancy, an employer must prove any one of the following according to the Labour Act:

• The business has ceased or diminished either permanently or temporarily or intends to cease or diminish.
• The employee cannot perform the work at the place where he or she was so employed.
• The requirements of the business for the employee to carry out work of a particular kind 

     have ceased or diminished or are expected to cease or diminish.

• The employee was supposed to perform work of a particular kind which must now cease or 

     diminish or is expected to cease or diminish.

Conclusion

An employer is under obligation to satisfy the court as to one of the above elements in order to prove that dismissal was based on operational requirements.

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Find out more about Labour Law in Malawi.