The extended lockdown in South Africa is preventing many companies from operating, or is making normal operations difficult.
Companies which are allowed to operate, like media publications and courier services, are also affected financially because of the economic slowdown.
The lockdown has already claimed many businesses, including Time Freight, Rebel Tech, Associated Media Publishing, and Caxton Magazines.
Many prominent South African companies have also applied for business rescue, including Edcon and Comair.
To try to stay alive, companies are forced to cut salaries, put staff on short time, and even retrench employees.
EOH, for example, has announced that its executive committee will take a salary reduction of 25%, with other staff taking a 20% pay cut.
EOH is also reviewing all fixed-term and consultant contracts, and reassessing the retirement policy for those over 65 years old.
ArcelorMittal South Africa has announced short-time and salary reductions for all employees with effect from April 2020.
During these desperate times, desperate measures are not unexpected. It does, however, raise questions about the rights of employees.
Megan Harrington-Johnson, managing partner at HJW Attorneys, spoke to Jacaranda FM about the right of employees regarding salary changes.
Can a company change your salary or salary structure during the lockdown?
What many companies in South Africa are doing during the lockdown is to negotiate amendments to employees’ salaries. This is to keep themselves afloat in an attempt to avoid retrenchments.
Companies are therefore entering into arrangements with their staff. If this is done unilaterally, without consulting their staff, it is technically illegal.
To make changes to employees’ salaries, companies have to do it in consultation with the affected employees. The employees must, in principle, agree to the salary changes.
Theoretically speaking, however, it is like a gun to your head. Unless you accept a reduction in salary, you will be retrenched.
In short, if the salary changes are done in consultation with employees, it is allowed and legal.
What is an acceptable warning period before salary changes are implemented?
There is no period stipulated in law which sets a strict guideline on what an acceptable time frame is to implement salary changes. It should, however, be reasonable.
Employers can therefore not tell their employees a day before payday that their salaries will be changed.
You would generally think that a week’s worth of negotiation and consultation would be reasonable and fair in these circumstances.
If your salary has been cut, what happens to our obligations like rent and debt?
The unfortunate reality is that your obligation to repay your debt is not affected by your salary having been reduced.
You still remain liable to pay all of your debts and all of your other financial obligations.
There is one exception – if the institution which provided that contract or credit facility to you agree through consultation to reduce the payment or obligation.
Good news is that many banks and landlords are agreeing to reduced payments or payment holidays, because it is in their long-term interest to retain good clients.