Like many other countries, Kenya has been experiencing a cost-of-living crisis alongside record-high inflation and the looming threat of a recession on the horizon. During a recession, the economy slows down, forcing businesses to investigate ways to stay afloat. Oftentimes this includes cost and staff reduction plans like retrenchments and redundancy.
Sadly, in the coming years, we must expect more businesses to embark on the restructuring process considering all the macroeconomic stresses we all face. But it needs to be done right.
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The redundancy process, in particular, is a challenging time for employers and employees. Redundancy can arise due to various reasons, such as a change in the business landscape, a shift in the company’s strategy, or economic downturns. Whatever the reason may be, it is essential that employers manage the redundancy process to ensure the best outcome for all parties involved.
It is worth noting that the declaration of redundancy is a managerial prerogative driven by business operations and market dynamics. Therefore the court is reluctant to interfere unless it is sufficiently demonstrated that there was no valid or justifiable reason for the redundancy.
In a recent employment dispute ruling, we saw the court rule in favour of Kenya Power & Lighting Company Ltd (KPLC), the employer in the suit. Between 1998 and 2003, KPLC faced several challenges, including a prolonged drought, which significantly affected the organisation’s business operations and led them to restructure the business and reduce costs. Redundancy formed part of the reduction of costs, and consequently, more than 300 employee contracts were terminated, which led the employees to file a suit against the organisation in 2002.
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Employers should note that employees do not become redundant; their positions do. Therefore, when the position becomes redundant, the employee can be re-deployed, which means the employee is given another job or retrenched and loses their job altogether. For a redundancy exercise to be considered lawful, an employer must demonstrate that there are valid and justifiable reasons for the redundancy and that all procedures provided in the Employment Act of 2007 have been followed.
The redundancy process can be broken down into five distinct steps:
1. First and foremost, employers need to notify employees of the intended redundancy. The notice should include the reasons for and extent of the redundancy.
2. Secondly, the Labour Officer must also be notified of the intended redundancy.
3. Following this, the third step involves a consultation process to ensure fairness.
4. The fourth step includes a notice of redundancy, a new appointment, or retention.
5. Lastly, employers need to issue a certificate of service, and on the last day of employment, the employee must be paid their terminal dues.
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Although the law can feel like a rigid process, it is important to remember the humanity inherent in this process. Managing redundancies can be a challenging task for employers, but it more often pales in comparison to losing one’s livelihood – especially in these difficult times. That’s why it is paramount that employers successfully navigate the redundancy journey to minimise the impact on their employees by being transparent, providing support, ensuring fairness, and maintaining transparency.
Christine Mugenyu, Senior Associate at Cliffe Dekker Hofmeyr (CDH), a full-service corporate law firm with an extensive reach across Africa. She is well-versed well-versed in dispute resolution, employment law and business rescue, restructuring and insolvency
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