By Jacquiline G. Mutahangarwa (Senior Legal Officer)
Generally, the Laws of Tanzania allows termination of employment contract by either party to the contract. Termination has to clearly state the reasons that justify termination and follow procedures. Under the law there are four grounds that may justify termination of employment by employer which are misconduct, incapacity, incompatibility and employer’s operational requirements/ retrenchment. When it comes to termination of contract an employer is advised to comply with the requirements of law, failure to do so will result in legal punitive. Hence we have prepared this publication as general guideline on the thing to consider before retrenchment, documents checklist and the benefit of the employee’s retrenchment in Tanzania.
THINGS TO CONSIDER BEFORE RETRENCHMENT
Retrenchment is the termination of employment contract based on the cutting down or reduction of employees due to economic, technological, structural or similar needs of the employer. Section 38 of the Employment and Labour Relations Act Cap 366 R.E 2019 provides for the procedure to be followed on retrenchment.
- A notice of intention to retrench
The employer has to notify the employees on his intention to retrench as soon as it is contemplated. The notice has to show reasons of retrenchment, timing and any other relevant information for purpose of proper consultation.
- Consultation
The consultation begins once employer wants to retrench. An employer has to meet the employees who are at risk of being terminated either personally or through trade union at work place or any other agreed place. Whereby the consultation has based on the ways of avoiding the proposed retrenchment, how the employer could reduce the number of proposed employees to be retrenched and mitigating the consequence of the retrenchment.
The purpose of retrenchment is to permit employers and employees to undertake a joint problem solving exercise so as to reach agreement on:
- The reasons for intended retrenchment
- Measures to avoid or minimize intended retrenchment
- Criteria for selecting employees to be retrenched
- The timing of retrenchments
In case the agreement is reached by parties then it will bind them as collective agreement in terms of section 71(3) of the Act. And where the consultation has failed to reach the agreement, the matter is required to be referred for mediation before the Commission for mediation and Arbitration (CMA).
RETRENCHMENT DOCUMENTS CHECKLIST
It is strongly advised that before retrench, the employer has to prepare the document checklist that will help to guide him and to ensure that requisite procedure have been followed. The checklist includes the notice to retrenchment, invitation to consultation to affected employees, retrenchment agreement and the termination letter.
BENEFIT OF THE EMPLOYEES RETRENCHMENT
The benefits are provided under section 44 of the Employment and Labour Relations Act, applies where the contract of employment is terminated. The following are the benefit which employees entitled to;
- Remuneration for work done before termination
- Payment in lieu of notice
Generally, the law wants the employer to issue a notice of retrenchment to the employee but in case the employer fails to do so hence, obliged to pay at least one (1) month salary to employees whose employment contract terminated.
- Severance pay
The employer is required to pay severance pay which is the amount equal 7 days’ basic wage for each completed year of continuous serve up to maximum 10 years. The calculation of severance payment is as follows; gross monthly salary divided by Twenty-six (26) working days multiplied by seven (7) times the number of the year of service up to maximum Ten (10) years.
- Transport allowance (Reparation)
The employee is entitled to transport allowance to the place of recruitment in case has been terminated other place than a place of recruitment of employee. The transport allowance shall be equal at least a bus fare or as bargained between parties.
- Leave accrued but not taken (Annual leave)
- Prescribed certificate of service
CONCLUSION
The termination of employer’s operational requirement for it to be fair has to follow procedure and any other requirement provided in the law, hence it is important for the employer to comply with the law. In case the employer after two years of retrenchment seeks to recruit employees in comparable occupation then shall consider the retrenched employees for re-employment.
Please contact our lawyers for guidance and professional advice before undergoing retrenchment process.