Companies defend termination of contracts

by Sunday News Online | Sunday, Aug 2, 2015 | 2131 views

Roberta Katunga Senior Business Reporter
DESPITE the massive job losses worsened by termination of contracts by employers following a Supreme Court ruling, employers have maintained that companies are just shedding off “dead weight” that has been weighing down operations since industry was performing below capacity and could hardly afford to meet daily needs. Last month, the Supreme Court passed a ruling that gave firms the power to terminate contracts of employment upon issuing three months’ notice without offering an explanation or following the retrenchment route, triggering massive contract terminations with industrial experts estimating that more than 7 000 workers have been fired since then.

Employers, captains of industry and economists interviewed, however, said companies were merely downsizing their staff which was a better option compared to liquidating.
Speaking on the agriculture sector, Agriculture and Rural Development Authority (Arda) board chairman Mr Basil Nyabadza said if the country needed to be competitive, there was a need to revise costs as local products were expensive compared to the region partly due to the use of the American dollar.

“When we converted from the Zimbabwe dollar to a multi-currency regime, we should have revisited our labour laws then because there was a massive change in terms of value. This ruling is coming years later when it should have been done then,” said Mr Nyabadza.

He said almost every institution including Government was carrying excess or unproductive labour hence it was important to shed that weight and engage employees on merit based on productivity.

He said all employers welcomed the Supreme Court ruling as it would restore viability within all economic sectors.
“In the agriculture sector we will benefit because we were retaining unproductive labour. To be competitive it is important to shed excess labour and this will in turn attract lines of credit as no financial institution will loan a company money for wages at the expense of production.

When the business has improved one can then engage more labour,” he said.
Zimbabwe National Chamber of Commerce Matabeleland Chapter chairperson Mr Crispen Mugova said the issue was bigger than what people were focusing on as it affected both workers and employers.

He said creating uncertainty and lack of security in the workforce was likely to cause problems in productivity while there was no way that companies could keep employees and not be able to pay them.

“Most companies especially in the manufacturing sector are downsizing, those in processing have been plagued by declining orders. Another major challenge has been that of power, and it has resulted in stoppages in production as some companies importing raw materials receive their orders late and the market has been unpredictable resulting in low capacity utilisation.

The biggest expenditure has been wages and salaries and companies are failing to honour obligations of wages. You cannot keep employees and not be able to pay them,” said Mr Mugova.

He said there was, however, no need to trigger unnecessary alarm as downsizing had been going on for some time and despite this some companies like Archer Clothing in Bulawayo had actually been employing.

“If a business is doing well there is no need to downsize but those facing operational challenges and low capacity utilisaton are the ones that should be cutting all overhead costs including labour,” he said.

He, however, urged companies to find ways of increasing capacity and employing other avenues of operation.
“We urge all our members not to overreact,” Mr Mugova added.

Association for Business in Zimbabwe chief executive Mr Lucky Mlilo said this was a situation that needed to be handled carefully.
Mr Mlilo said the only solution was to work on labour policies that would address the situation.

“Employers have been crying about labour laws for a very long time and it is up to Government to rationalise policies. There is a need for wages that are production related.
Employees are assets to companies hence the need to strike a balance,” said Mr Mlilo.

Economist Mr Kipson Gundani said labour issues had been contentious for more than 10 years thus the ruling that made it flexible to rationalise labour would have an impact.
He said labour was not a commodity hence fair treatment was warranted.

“Labour is a variable cost as it varies with output and companies should be free to rationalise whenever it is necessary. There is no justification to cling on to excess labour and that is the only way to remain competitive and in line with global trends,” said Mr Gundani.

He said some workers had gone for more than six months without salaries because the companies were failing to pay them hence it was better to release those people and allow the company to start on a new footing.

“Even if you force a company to cling on to the excess labour that they are failing to pay, you are merely prolonging the demise of those workers. Rather act now as there are long-term benefits which include a reasonable cost structure and they can employ again in future when they are now stable,” he said.
The debate on the termination of contracts with three months notice has been raging as thousands of workers have lost their jobs.

Government is working on modalities to come up with an amicable solution that will benefit both parties.
Finance Minister Patrick Chinamasa in his mid-year fiscal policy review statement reiterated the concerns by employers saying labour reforms should be on viability of production and benchmarking on labour practices in countries whose economies are experiencing rapid growth.

Minister Chinamasa said the economy, which is under sanctions, could not afford the inefficiencies obtaining in the employment sector where workers accrued wages in circumstances where there was no production.

“Let it be known that a flexible labour market is key to our economic recovery. A case in point relates to Zisco Steel where the company has not been producing since 2008, but continues to accrue payroll liabilities which were $131,5 million as at 31 May 2015.

We have similar experiences at Air Zimbabwe, National Railways of Zimbabwe, the Grain Marketing Board, among others,” said Minister Chinamasa.
He said employment cost arrears at these entities were $140,1 million at the National Railways of Zimbabwe while at Air Zimbabwe the arrears stood at $136,4 million and $20 million at the Grain Marketing Board.

“Mr Speaker Sir, such situations neither serve the interests of the employer nor the employee, as well as those of the taxpayer, as such entities become unattractive to any potential investor.

Therefore, the debate over the Supreme Court ruling, and the subsequent reforms to the Labour Act need to balance the interests of both employers and employees,” he said.

>
Like it? Share it!