Causes of retrenchment pdf

It is aimed at saving a financially ailing business establishment from eventually collapsing. Basic Requisites of Valid Retrenchment To justify retrenchment, the following requisites must be complied with: 1. The retrenchment must be necessary to prevent business losses; and 2. The business losses sought to be prevented are serious, actual and real. Separation Pay In case of retrenchment to prevent losses, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

A fraction of at least six months shall be considered one whole year. As provided under Article of the Labor Code. A mere decline in gross income cannot in any manner be considered as serious business losses. It should be substantial, sustained and real. Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.

A position is redundant where it superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as over hiring of workers, decreased of volume business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

In Wiltshire, the Court held that an employer has no legal obligation to keep on the payroll employees more than the number needed for the operation of the business.

It is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees. A written notice served on both the employees and the Department of Labor and Employment DOLE at least one month prior to the intended date of retrenchment as required by the Labor Code; b.

Payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher; c. Good faith in abolishing the redundant positions; and d. Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished like: over hiring of workers, decreased of volume business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise Separation Pay In case of termination due to redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one 1 month pay or to at least one 1 month pay for every year of service, whichever is higher.

Proof of Losses Not Required Redundancy does not require the exhibition of proof of losses or imminent losses. In fact, of all the statutory grounds provided in Article of the Labor Code, it is only retrenchment which requires proof of losses or possible losses as justification for termination of employment. Duplication of Work Not Necessary. Redundancy does not necessarily refer to duplication of work.

The company can use this to limit the diversity of their operations or just the size of their processes in general. The advantage is that the wage bill is reduced, the disadvantage of the retrenchment growth strategy is that a firm may loses employee without reaching their full potential. So, whilst all lay-offs may be part of an retrenchment strategy, not all retrenchments necessarily involve lay-offs. There are five: Retrenchment, Unemployment, Economic Depression, Rise in levels of poverty and Decline in welfare of society.

Many economists often use the terms of retrenchment and downsizing to explain changes in the way a company does business. Clearly downsizing means that a company has done several things. Retrenchment is often used as a term that means a company has stepped back and refortified its basic products.

It can mean changes in the amount of debt it has and refocusing on tried and true product development. Difficult conversations with employees can involve broaching awkward topics around them. These could include explaining reasons for retrenchment or settling disputes. A retrenchment strategy using horizontal integration though internal means. Log in. Study now. See answer 1.

Best Answer. Some of the causes of retrenchment are: Technology : New technologies can cause the need for company reorganization. Economics : A company might need to reduce costs, or simply wish to increase profits. Structural : The restructuring of a company can sometimes make a position redundant. Study guides. Economics 20 cards. How long does it take for a check to clear. Are chemicals safe. How could the federal reserve encourage banks to lend out more of their reserves.

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