Slashing salaries bears watching

The Ministry of Labour wasted time and energy last month making ridiculous noises about regulations to forbid employers from firing staff. Instead they should have gotten ahead of the curve and provided guidelines when employers slash salaries.

Mass salary cuts from a wide range of businesses in all sectors are in the headlines. This is inevitable in these unprecedented, harsh and unclear business times due to the State of Emergency and its backlash.

There could be thousands of bankruptcies and business reductions in the wake of this pandemic’s devastation. Hundreds of thousands of employees will be affected in some way. The Director-General of the National Planning Commission says that the economy has already lost a third of its economic output.

Employers searching for lifelines are now seeing that the so-called bank loan ‘holidays’ are not. FNB, for example, in referring to its offer says, “WARNING: During the relief period, the loan will continue to bear and accrue interest which will still be capitalized and compounded (you will pay interest on interest) monthly…The bank is not writing-off or waiving any interest or capital.” Other banks in Namibia are doing the same.

Government funds that could help relieve a part of the burden from distressed businesses have so many strings attached that many will not qualify. One-shot bailouts only kick the can down the road. If business cannot recover in the very short term before the can stops rolling, they are doomed.

No business happily dances towards the bankruptcy process. COVID-19 has pushed companies to the edge in a way never before seen.

Reducing labour costs is always one of the first steps to save a dying company. It might help the business hang on until business picks up (hopefully). It could allow staff to get some income for a longer period of time rather than receiving nothing precipitously.

It is risky.

For the staff, after taking a pay cut and trashing their own lives as a result, the company could close down anyway.

On the other hand, the risk could pay off. The staff sacrifices in hard times could boost the business to slowly recover. Then salaries should be slowly restored to their pre-cut levels.

Here is the rub of a capitalist system in which we live.

Companies, who may not need a 40 percent salary slash by employees and could limp on with a 15 percent slash, will still push for the largest percentage give-back possible. They will strive to maximize opportunities. They will use COVID-19 to milk the situation. Who is there to check this situation?

Workers can get cheated. Employers are cutting salaries, but not all are cutting the hours of work as well. People are being forced to do the same work for less pay.

Salary givebacks must be a mutual agreement with the employer. It must be in writing to protect all parties. Such cuts must never be a testimony that staff was ‘overpaid anyway.’

Worse, once employers who are lucky enough to slowly emerge from the economic post-COVID-19 mess, enjoy the lower wage bill, it will be like weaning them off a drug to get them to return salaries to the pre-reduction levels. Who steps in to help with this?

Workers whose salary is not hourly based are more vulnerable. Some employers are claiming that ‘less work’ is being done due to COVID-19 negative impacts, and therefore salaries are arbitrarily lowered. “Less work” must be quantified and defined in writing and all affected must agree.

Some, particularly those who were already trying to figure out how to cut their wage bills before COVID, now have a justifiable ‘out.’ They are using the pandemic as a smokescreen for illegal labour practices. Workers must be protected against this.

Realistically speaking, businesses are in the worst trouble financially than ever before. They need these salary cuts to have a slight chance to survive. For now, their truth must be accepted on face value. But, after three or four months pass, those that are still in business, must be re-visited with the full input of the Ministry of Labour.

What about staff that makes a decisions to move on.

What happens to the severance package of one week’s salary for every year worked? If the ending salary is only HALF of what was previously paid, then on what basis is that severance pay out calculated?

There are companies attempting to apply annual leave to the lockdown period. An employee terminated for business reasons gets their unused leave in cash. If the leave is ‘gone’ in this manner, there will be less cash due to the worker that leaves. Is that legal?

Wake up over at the Ministry of Labour. Develop guidelines for employers about cutting staff salaries and send them out everywhere. Let people know their rights.

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