South Africa is currently experiencing a number of economic challenges, such as rising taxes and increases in VAT, reduced foreign investment, and the struggles of state-owned entities. We are also facing unpredictable external challenges, such as potential export tariffs (or at the very least secondary effects of tariffs on our trade partners) and the possibility of losing funding from agencies such as USAid. This is happening against a backdrop of global economic instability, with factors such as geopolitical tensions, fluctuating commodity prices, and the lingering effects of the Covid-19 pandemic all contributing to uncertainty.

Economic upheaval, together with policy changes and shifting market demands, makes proactive workforce management crucial not just for labour law compliance, but indeed the ultimate survival of any business. Companies need to ensure that their people strategies align with business objectives and labour legislation in order to maintain stability, avoid legal risks and protect both employer and employee interests. Three crucial strategies for achieving this are ensuring that employment contracts are fit for purpose, having sound policies and practices in place, and being staffed correctly to remain agile and responsive to the fluidity of the economic environment.

Choosing the appropriate employment contract for any appointment is crucial in ensuring flexibility and compliance with South African labour laws. Businesses need to make sure that the terms of their contracts provide adequate protection to both employers and employees. For example, permanent contracts, which offer job security and benefits, are better suited to long-term business needs. Fixed-term contracts, on the other hand, are ideal for project-based or temporary roles, provided they comply with the Labour Relations Act (LRA) requirements, while independent contractors can provide a business with greater flexibility. The latter reduces the administrative burden and allows a business to scale up or down with ease, but requires clear distinctions to avoid risking disputes or penalties.

Well-defined employee policies and procedures are integral to sustainable business practices. Clear policies guide a variety of labour relations aspects, such as workplace conduct, dispute resolution and performance management. It is crucial that companies develop and maintain comprehensive HR policies that align with labour legislation. They should also regularly update procedures to reflect changes in employment laws and business needs. In addition, using clear communication and suitable training helps to ensure that employees understand the company’s policies, while fair disciplinary and grievance procedures can mitigate risks and foster a pleasant and productive work. Sound policies, specifically grievance procedures, also encourage employees to resolve matters internally, rather than escalating to external bodies such as the CCMA or labour department.

During economic downturns, the spectre of retrenchment often raises its ugly head. Should retrenchments become unavoidable, it is critical to follow the correct legal procedures to ensure fairness and compliance with South African labour law. Key steps that need to be taken in such a case include issuing the notice prescribed by Section 189 of the Labour Relations Act, engaging with employees and trade unions, using objective and justifiable criteria for selecting employees to be retrenched, and ensuring compliance with statutory severance pay and other entitlements.

It is worth remembering that businesses are legally obliged to consider possible alternatives such as reduced hours, temporary layoffs, or reskilling before proceeding with retrenchments. The most important part of a Section 189 process is to issue a proper notice of intention to retrench and to engage in meaningful consultations before making any final decision. The most common procedural defect with these processes is where companies have already decided to retrench before heading into the process.

The reality is that South African labour legislation is complex and continually evolving, and failure to comply carries the risks of costly litigation, financial penalties, and reputational damage. Sustainable employment practices are essential for business resilience amid economic fluctuations, and by familiarising themselves with legislation and getting expert guidance, companies can safeguard their workforce without risking non-compliance.

Remember that compliance requirements are not draconian – by simply following a proactive approach to labour law you can ensure that your business remains agile, legally sound, and prepared for whatever challenges the unsettled economy may bring.

Written by Ryan Anderson, Labour Law Executive at Labournet