A synopsis of the Statutory Instrument 191 of 2024, Labour (Retrenchment) Regulations 24 –
With special emphasis on the definition of the Minimum Retrenchment Package
Background
- Labour law, like any other legal framework, is never static but always subject to a continuous evolution. Therefore, it is important for both employers and employees to remain vigilant and stay informed about any changes in the law.
- On the 26th of August 2015, Zimbabwe saw the promulgation of the Labour Amendment Act No. 5 of 2015 (LAA 5/15) that brought a major transformation in the retrenchment law of Zimbabwe among other employment law provisions.
- The LAA 5/15 made the retrenchment process much easier on the side of the employers.
- For the first time in history, the Labour Amendment Act No.5 of 2015 introduced the minimum retrenchment package that was one month’s pay for every two years of service, with a minimum package calculable on a pro-rata basis for shorter periods worked.
- In 2023, the retrenchment law was further transformed by the introduction of the Labour Amendment Act No.11 of 2023. In precise, the process of retrenchment has again been made cumbersome similar to the situation that prevailed before the issuance of the Nyamande & Another v Zuva judgement, SC 43/15 of 17 July 2015.
- However, although the Labour Amendment Act No.11 of 2023 requires the payment of at least the minimum retrenchment package to the retrenched employees, it eluded or failed to define the minimum retrenchment package resulting in a legal challenge or gap.
- Section 12C (2)(a) of the Labour Act (as amended) provides that the minimum retrenchment package is payable to an employee in the absence of an agreed higher retrenchment package. However, since it failed to ascribe the value or formula for computing the minimum retrenchment package, the whole provision remained in suspensive mode due to the obtaining vagueness.
- Due to the mentioned legal gap, parties were by default left to negotiate the retrenchment packages, literally without a standing minimum retrenchment package at law.
Statutory Instrument 191 of 2024
- Statutory Instrument 191 of 2024 was gazetted on the 9th of December 2024. The statutory instrument establishes the composition of the retrenchment board, defines the minimum retrenchment package and an enhanced retrenchment package as well as provision of usable standardized forms during the retrenchment process.
The minimum retrenchment package
Section 5 of Statutory Instrument 191 of 2024provides that: –
“Unless better terms are negotiated and agreed between the employer and the employee or employees concerned or their representatives, a minimum retrenchment package of one month’s salary or wages for every year of service as an employee or the equivalent, lesser proportion of (one month’s salary or wages for a lesser period of service) shall be paid as compensation for loss of employment”.
- The definition or formula for deriving a minimum retrenchment package is now settled. Ultimately, the Statutory Instrument has fulfilled a legal gap in clarifying the criteria for deriving the minimum retrenchment package, the baseline for retrenchment package negotiations.
- The current minimum retrenchment package provided for by Statutory Instrument 191/24 has doubled the previous one that existed during the realm of the Labour Amendment Act No.5 of 2015.
- Thus, the current minimum retrenchment package is one month’s pay for every year of service as opposed to one month’s pay for every two years of service that existed under the reign of Labour Amendment Act No.5 of 2015.
- The minimum retrenchment package is again payable to employees on a pro-rata basis for any other shorter period worked.
- The powers of the retrenchment board have also been reignited in consideration and resolution of retrenchment issues.
Arising Effects on the now-defined minimum retrenchment package by SI 191/24.
- The retrenchment package introduced under Statutory Instrument 191 of 2024 is more generous to the employees as compared to the minimum package previously espoused in the Labour Amendment Act No. 5 of 2015.
- Specifically, Statutory Instrument 191/24 has changed the minimum retrenchment package from two weeks’ salary for each year of service to one month’s salary for every year of service.
- However, it is important to note that the existence of a defined minimum retrenchment package does not limit what can be offered to the retrenched employees. Both employers and employees are at law required to negotiate and if possible, employees should be allowed to negotiate for and even earn a more favourable retrenchment package.
- Alternatively, if the affected employee(s) consider that the employer is capable of paying above the minimum and the parties fail to reach an agreement, the employee can claim for what is called an ‘enhanced package’ before the NEC and/or the retrenchment board.
- An “enhanced retrenchment package” refers to a retrenchment package awarded to an employee by the National Employment Council (NEC) or the retrenchment board. This package is above the minimum retrenchment package and is typically awarded when there is a disagreement between the employee and employer regarding the terms of retrenchment.
- From 17 July 2023 (the period that saw the birth of the Labour Amendment Act 11 of 2023) to 29 December 2024 (the time the Statutory Instrument 191 of 2024 was gazetted), employers and employees were left in a quandary as far as the definition of the minimum retrenchment package was concerned due to the prevalent legal gap.
Conclusion
The minimum retrenchment package is now clearly defined, resolving the ambiguities that previously surrounded the implementation of Section 12C of the Labour Act (as amended by LAA 11 of 2023). Both employers and employees now have a solid baseline to refer to during retrenchment negotiations.
Prepared by
Faith Mupangani
Disclaimer: Faith Mupangani is a Designated Agent for the National Employment Council for the Cotton Industry and he writes in that capacity. He can be contacted on 0773150598, or by email fmupangani@neccotton.co.zw