The wording of employment contracts and the associated clauses are crucial and can affect the employment relationship when circumstances arise at a later stage. Many of my clients and business associates have heard me repeatedly say “be careful what you put in your employment contract. If it’s not done professionally or been properly reviewed, its guaranteed to bite you later.”
So, the question is – how will it bite you later? When entering into a contract, even as simple as an employment contract it, is legally binding. What you decide to document, is what you are going to be held to. The only way to alter the contract is through consultation with the employee. Consultation is not merely telling an employee that their conditions of employment are going to change. Consultation in this context means discussion and agreement. “Agreement” being the operative word. The risk is when times are tough or relationships are strained, the employee will be less likely to reach a point of agreement.
Common errors that most employers do not consider and may include in employment contracts are: Extending the required notice periods beyond those stipulated in the Basic Conditions of Employment Act. This is most probably done with the view of protecting the business so that the employer has enough time to replace the employee. The employer must however realise that should the employer wish to retrench the employee or request the employee to leave without working their notice period (outside of a summary dismissal), the employer is obliged to pay the salary due to the employee that they would have been paid if he worked the full “extended notice period” as per the contract. Another common error is to commit to 13th cheques or other bonuses. Later, due to financial strain or other business reasons, the employer may not be able to do so and will be required to pay the bonus unless they consult and obtain agreement to alter the contract. It’s highly unlikely that employees will waive their bonus without getting something else in return.
Many employers make use of templates from the internet or use another business’ contracts as a foundation for their own. In my experience, it has proven to be a very dangerous practice. Aside from the factors mentioned above, employers may be using a contract that is not relevant to their sector. This mistake could have the employer documenting incorrect overtime hours, incorrect overtime remuneration, or the incorrect severance pay amongst other employment conditions. This could either get the employer into hot water with The Department of Employment and Labour, a Bargaining Council, or even worse – the CCMA when you have retrenched an employee according to the wrong conditions of employment for the sector.
Due to lockdown and COVID-19, several new clauses should be considered to protect the employer and allow for unforeseen circumstances. My advice to employers is to add these clauses to new contracts, and if possible, consult with current employees and get them to sign an addendum to alter their conditions of employment. Having these clauses agreed to in a contract or an addendum allows the employer to immediately implement changes to employment conditions without the difficult task of consultation and obtaining agreement, and in the event of agreement not being obtained; forced to implement the retrenchment process.
A short time clause covers the employer to implement reduced working hours due to economic factors, slackness of trade, the lack availability of raw materials and similar conditions.
A Lay-off allows the employer to implement the “no work no pay” principle when the employer has no work for the employee to perform.
A clause for supervening impossibilities, where circumstances do not allow for either party to fulfill their contract, such as lockdown where an employer could not provide the employee work, and the employee could not tender their services to the employer.
The final clause being force majeure, where circumstances arise being either an act of God or man which does not allow the employer to trade.
Another risk is entering a fixed term contract without a retrenchment clause. A fixed term contract without a retrenchment clause cannot be terminated by retrenchment and the employer will be liable to pay the employee his salary for the remainder of the contract if terminated early by retrenchment. Essentially this means that a fixed-term employee has greater protection against retrenchment than a permanent employee if you have not catered for an out of the contract due to retrenchment.
If you are looking to change conditions of employment, as always, it’s imperative to consult. There are many unions knocking at business’ doors at the moment. If you are in a similar situation, I would recommend that you consult with employees and hopefully get addendums signed before signing a recognition agreement with the union, as the process will become delayed, tedious and difficult and may not have a successful result if a union becomes involved.
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Speak to Sindy on 087 073 6940 or 083 305 6219.