Workforce reduction during Covid-19: Information for employers

Employee retention has become an issue. As the COVID-19 pandemic takes the turn to an economic crisis, businesses across the board, irrespective of size, are feeling the burn.

Letting employees go in times of crisis is never an easy decision - it is worse when you have to let go of good people in times of a global crisis. In difficult times, the humane thing to do, to start with, is respecting the letter of the law, when pivoting the business for survival requires employee severance under pressure.

For private organisations (outside the economic zones) the law that applies in our country is the Bangladesh Labour Act, 2006 ("the Act") and the Labour Rules, 2015 ("the Rules"). The Act drtails several methods of severance, but the method that applies in present circumstances, dependant on the period for which the establishment is to be closed, is either (i) stoppage of work, (ii) lay-off or (iii) retrenchment.

Stoppage of work. Stoppage of work generally refers to a temporary cessation of work. Section 12 of the Act permits employers in times of epidemics (amongst others) to stop any section or sections of its establishment, wholly or partly, for such period as the cause for the stoppage continues to exist. The order of stoppage should be posted/hung on the notice board or at a conspicuous place within the establishment. This notice must contain direction as to when work shall be resumed and whether such workers are to remain at their place of work at any time before the recommencement of work. However, if the period of stoppage of work exceeds 3 (three) working days, stoppage of work shall not suffice; the workers shall be "laid off".

Lay-Off. Simply put, a lay-off situation occurs when the employer is unable to provide work for its employees but believes that it is a temporary situation.  Section 16 of the Act deals with lay-off of workers and mainly deals with the pay that is due to them. Whenever a worker who has completed at least 1 (one) year of service under the employer is laid-off, he shall be paid compensation by the employer for every day during which he is so laid-off, except for weekly holidays. According to Rules 25 and 32 of the Rules, a lay-off notice has to be given  to the Chief Inspector/Inspector General of the Department of Inspection for Factories and Establishment (DIFE), mentioning the number of workers affected and jobless.

This compensation is to be calculated at the rate of "half of the total of the basic wages and dearness allowance and ad-hoc or interim wages, if any, and equal to the full amount of housing allowance that would have been payable to him if he had not been so laid-off". Unless agreed otherwise between the employer and employee, workers shall not be entitled to the payment of this compensation for more than 45 (forty-five) days during any calendar year. The law does allow this 45-day period of lay-off to be extended with a different (lower) calculation of compensation payable for every extended term of 15 (fifteen) days or more. However, during a calendar year, if workers are to be laid-off after the first 45 (forty-five) days and for any continuous period of 15 (fifteen) days or more, the employer, instead of laying-off such worker, may instead retrench them. It should be noted however that where an employee is retrenched after implementing a lay-off procedure first, the employees shall be further entitled to 15 (fifteen) days' wages, in addition to the compensation or gratuity, which may be payable to him for retrenchment, as discussed below.

Retrenchment. Retrenchment is the severance of employees who have become surplus to the needs of the organisation. Retrenchment or downsizing can happen when the business no longer requires the same number of employees it used to, because the functions of the employees have either ceased or diminished to a significant extent or where the employer intends to cease continuing the business at a particular workplace or intends closure of the whole business, as may occur during the coronavirus (Covid-19) situation. Retrenchment is dealt with in section 20 of the Act. Section 20 of the Act allows any worker to be retrenched from service of any establishment on the ground of redundancy. Where workers have been in continuous service with the organisation for not less than 1 (one) year, the employer can retrench workers by paying them compensation at the rate of 30 (thirty) days' wages for every completed year of service or gratuity, whichever is higher.

In addition to the above payments, employees will still be entitled to their provident fund payments, if any. All final payment of dues of the retrenched employees will need to be paid/cleared within 30 (thirty) working days following the date of cessation of their employment and the retrenched employees shall be furnished with certificates of service at the time of retrenchment.

Employers should also refer to their internal company policies to ensure compliance and more so to ensure that the organisations are meeting promises.

Lastly, an organisation is only as good as its people. The people facing the brunt of the decision, and being asked to leave, should be consulted and advised. Advising, information sharing, transparency and keeping relevant employees in the loop regarding the performance of the business, as the crisis waxes and wanes should be the norm in all organisations; not only because it is the right thing to do, but also because a sudden declaration of downsizing increases the chance of a potential dispute situation. This is the time for Human Resources (HR) to step up and demonstrate capability.

Anita Ghazi ([email protected]) is the Managing Partner  and Jarif Ahmed ([email protected]) and Nauriin Ahmed ([email protected]) are Associates at The Legal Circle

www.legalcirclebd.com