 With economic commentators predicting a difficult 2016, employers across the region may be forced to look at staffing levels. With commodity prices struggling to recover, the Chinese stock market losing eight percent of its value on the first trading day of the year and oil prices remaining low, it’s no wonder that the first trend of 2016 looks set to be the implementation of cost reduction measures. More often than not, this means reducing the workforce. In this article, we examine the issues involved when an employer reduces headcount together with the various regulations applicable across the GCC.An employer’s ability to lawfully reduce headcount Redundancy has not historically been a recognised concept across the GCC. However, in the recent amendments to their Labour Codes, Bahrain, Kuwait and KSA introduced provisions providing for a recognition of redundancy and the dismissal of employees by reason of redundancy in certain circumstances. The most extensive of these are in Bahrain where Article 110 of the Labour Law for the Private Sector, No. 36 of 2012 states that: “An employer may terminate the contract of employment because of the total or partial closure of the establishment, scaling down its business or replacement of the production system by another that may affect the size of the workforce, provided that the contract’s termination shall not take place except upon giving notice to the Ministry concerning the reason for termination 30 days before the date of giving the worker notice of termination.” In Kuwait and KSA, however, the circumstances in which redundancy dismissals are permitted are limited to where the establishment of the employer is being closed (KSA and Kuwait) or there is a cessation of business within the unit or operation where the employee works (KSA only). Where a redundancy exercise does not fall within the circumstances provided for in the Labour Codes, or is in one of the other jurisdictions (such as the UAE) where the employment laws do not include the concept, the usual termination provisions apply and potentially, claims can be brought for unfair or arbitrary dismissal. Getting the process right From an employee relations perspective, a standardised approach may help to smooth the transition for employees as well as those who remain within the business. Choosing to adopt this approach, however, could increase business costs where the process extends the employment period (and thus salary payments). On the other hand, it may reduce the prospects of a successful claim against the employer for compensation (in addition to common entitlements such as notice, end of service gratuity and payment in lieu of holiday). A potential process an employer could choose to follow would be by: announcing the pending restructuring to the relevant employees (i.e. at a ‘town hall’ type meeting); ensuring that there is a mechanism for employees to air concerns and ask questions (many employers also produce FAQ documents which are updated and circulated at regular intervals); conducting individual meetings with affected employees to explain why their role is at risk of redundancy and explore alternative options; and after these meetings, efforts should be made to be seen to have considered any alternatives put forward by the employee and to have explored any other potential solutions before the decision is made and communicated to the employee. In Bahrain, a formal notice of the intention to make redundancies must first be made to the Ministry of Manpower and no notice of termination can be issued prior to the notice being given and acknowledged by the ministry. There may also be additional requirements for nationals – for example, in the UAE, an employer falling under the Ministry of Labour jurisdiction should obtain prior consent for the dismissal of a UAE national. ––––––– |
Headcount reduction in the GCC
