Redundancy legislation - How does South Africa compare globally?

2 Jun 2014 3 min read Article

A report comparing labour legislation governing redundancies and restructuring in 23 countries around the world has shown that South Africa's labour law is on par with many other first world countries in the study.

The DLA Piper Global Employment team put together the report entitled, A Global Employment Guide to Redundancies and Reductions in Force, with Cliffe Dekker Hofmeyr contributing the South African chapter.

Aadil Patel, Director and National Head of the Employment Practice at Cliffe Dekker Hofmeyr noted, "In this research we found that South Africa's employment legislation is actually on par with many first world counties.

The company we keep in terms of our labour legislation regime includes Australia, Singapore, France, the Netherlands, Hong Kong and the United Kingdom.

South Africa received an A rating for its redundancy and restructuring legislation in the Guide.

"An A rating in this Guide means that the country is considered to have procedures to be followed in the redundancy and restructuring process, but it was possible to make redundancies within a reasonable period of time and without incurring liability if the procedures were followed. However, if the pitfalls were not avoided, the cost implications could be fairly significant," Patel explained.

Countries who share the Global A rating with South Africa are Australia, Austria, Belgium, France, Hong Kong, the Netherlands, Norway, Poland, Romania, Russian, Singapore, Spain, Thailand, United Arab Emirates and the United Kingdom.

"What this A rating essentially means is that South Africa's employment legislation compares favourably to other first world countries and offers a similar legal employment framework for multinationals operating in Europe, Asia and the Middle East. The legislation in this rating (A) is balanced as it provides protection and legal recourse for both the employers and employees," said Patel.

The R rating was given to countries where there were significant risks and the processes involved in restructuring and redundancies could be highly regulated, could take a long time and could have significant cost or other implications. Countries rated R include China, Germany, Italy and Japan.

The G rating in the Guide is given to countries where the redundancy process was relatively straightforward and easy to get right. It was quick to implement and there were either no restrictions at all or limited requirements which were easy to satisfy. Countries rated G included Mexico and the United States.

Tim Marshall, partner and DLA Piper's International Head of Employment, explained the rationale behind the research, "To remain competitive in a global market, multinationals are under increasing pressure to ensure they are structured correctly. Restructuring on global scale involves workforce reorganisation and reduction in force and can be complex as the processes and criteria differ vastly across borders, and some countries pose significant challenges and risks. The report outlines the redundancy process in 23 key jurisdictions across the EMEA, Asia Pacific and the Americas.

"Companies operating in a global business environment with subsidiaries across a large number of jurisdictions face a daunting challenge. However, employers who have a comprehensive policy that meets the needs of differing regimes will be better prepared to handle complex employment procedures," Marshall said.

Patel noted, "As an employment practice we will, together with DLA Piper, be issuing numerous guides on employment legislation, outlining information on a global, comparative scale. This research affords us the opportunity to assess where our country's employment legislation fits in, in terms of global best practice. The ability to research on such a global scale is one of many benefits of being part of a pan-African and global alliance with DLA Piper, one of the world's largest law firms."

Patel added, "Our global research aims to improve understanding and awareness of topical employment issues across borders. Our previous publication: 'Whistleblowing: An employer's guide to global compliance', was recently mentioned in a judgment of the Labour Court of South Africa.

Tlhotlhalemaje AJ referred to the favourable rating our local Protected Disclosures Act received and favourable status in respect of other jurisdictions reflected in the global whistleblowing guide, "as South Africans, we should ordinarily be in self-congratulatory mood and patting ourselves at the back for having trumped such illustrious nations known generally for clean governance, and also being on par with such good company in the field of whistle-blowing."

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