Commentary, 1st – 8th May, 09

The government should urgently review the Act governing redundancy packages so as to reflect the new investor challenges in the country. The Labour Day celebrations came a week after the Tripatite consultative meeting involving the government, Zambia Federation of Employers and Trade Unions failed to approve reports that would have led to the review of various Acts governing labour-employer relations in Zambia.

The redundancy packages were particularly initially crafted to protect employee interests at the time the country was going through a rigorous privatisation process. To this very day, employees are still entitled to several months’ worth of pay for each year served and this has proved an expensive exercise for many companies.

While it remains important that employees should find shelter in a strong Act that protects their interests, it is also important to bear in mind that the Act as it exists currently, will lead to business failure now and in future. The situation is worsened by the dire traits under which business is operating today. Some mining companies are for example under care and maintenance. If compensation packages were flexible, some of these decisions could not have been made by investors.

The following are the challenges associated with the current Act on redundancies:

First, it has been seen as a cost to doing business in Zambia and has rendered the country quite uncompetitive for investments in the region.

Second, many companies prefer to hire casual workers even when they have capacity to engage pensionable jobs. Given the high level of uncertainty in the investment climate, investors believe they are safer engaging casual labour as pensionable jobs may prove costly when the businesses no longer remain profitable.

Third, most of the companies, mainly parastatals, are failing to restructure operations owing to the huge compensation packages associated with downsizing. As a result, these companies have carried along unnecessary baggage which will in the future become a huge cost to taxpayers. Even transfer of ownership which protects the survival of companies has proved to be difficult given that new owners would first of all be required to pay off workers before absorbing them into the new entity. Forth, even in cases of insolvent companies, the law still applies. Logically, it is not possible for an insolvent company to meet the redundancy packages for employees.

As a way of going forward, the government should compare what prevails in other neighbouring countries so as to come up with an Act that efficiently protects both the interests of investors and employees.