• Economy has been on a downward spiral that is forcing even SMEs to downsize
Most of us associate the words "layoffs" and "retrenchment" with large companies, but the difficult economic environment is forcing many small businesses to cut down the number of employees.
You may have noticed over the past two years that hotels, restaurants and bars have fewer employees. Beauty salons, schools and building contractors are also cutting back. This is why you have to wait longer whenever you need a service.
The problems affecting businesses had been brewing for a while. The cost of doing business in Kenya is notoriously high because of rising taxes, expensive loans, laws that are enforced arbitrarily, unreliable infrastructure and a high cost of living. Government data shows that the restrictions imposed in 2020 to contain the spread of Covid-19 resulted in the loss of 186,000 jobs.
The reopening of the economy was quickly followed by worries over the 2022 elections. There were huge increases in the prices of food, fuel, electricity and other raw materials required by the business sector. Businesses had to adopt cost-cutting measures, one of which was laying off employees.
Most small business owners lack knowledge of how to handle employees. It is not unusual for employees targeted for retrenchment to arrive at work one day to find the doors locked. Layoffs can be very traumatic to affected employees if they did not have prior information about it.
What is the best way to implement employee layoffs?
1. Transparency: The Society for Human Resource Management recommends keeping employees informed of the company's financial position, goals and objectives. Honest communication will boost the morale of those to be retained. For employees being laid off, be open with details of terminal pay, last day of employment and any other relevant issues.
2. Be sensitive: Layoffs can often be a shock. Speak to affected employees privately. Don't argue, threaten or try to diffuse the situation with jokes. While some employees may get stunned into silence when informed about their dismissal, others will lash out in anger. Anticipate possible reactions.
3. Follow the law: Familiarise yourself with labour laws in terms of how much notice to give and how to calculate the final package. This will help you avoid costly labour-related legal cases.
4. Define the layoff criteria: Laying off employees without clear criteria could introduce prejudice into the process. Prejudice discriminates on race, ethnicity, religion and gender. Prejudice based on wealth status, age and disability can also influence layoffs. There is evidence to show that women bear the brunt of layoffs. According to the Kenya National Bureau of Statistics, 62 per cent of jobs lost across the country in 2020 were held by women. Some employers are tempted to use layoffs to get rid of troublesome employees, such as trade union representatives.
In summary, every business will go through a period when one or more employees have to be sent away. The manner in which layoffs are handled will determine whether affected employees go out as allies or as your biggest enemies.