Retrenchment as an option

Published by rudy Date posted on April 9, 2011

Retrenchment rightly applies if individual companies are suffering from financial losses, but not when it becomes pandemic. In which case, the economy is experiencing a recession. Moreover, the term is more of a euphemism than a candid admission that the employee will be terminated from the service, and the valid reason given by the Labor Code under Article 283 is to prevent losses, closure or cessation of business operations. Thus, looking at it the objective is to save the company from going down the drain than of the employment of the workers whose loss of income could mean their life and death.

Nonetheless, retrenchment would be less devastating if we opted to deregulate wage because that could make our labor cost more resilient. Although at a certain degree, the economy would still be affected, just the same we could easily make a rebound. The thrust would not be on how to pass judgment on the fate of the workers, but on how to adjust their wage during the crisis. Maybe it could not instantly restore our competitiveness, but certainly that approach could save the company from going down the drain.

Most important, we would not be entrapped into taking that option of firing our workers every time the company suffers financial difficulties. Besides, automatic wage reduction is most humane because it instill to all that there is a serious problem, and the company need not use the rank-and-file employees as cannon fodder.

While nobody is saying that retrenchment should not be taken as an option, the government, standing to balance the interest of labor and capital, should take a more objective approach in resolving the perennial problem of financial losses. Surely, there are other satisfactory formulas, but as it is we opted to focus on the workers; that at any moment the company fumbles they would be the first to be jettisoned. Both the employers and the Department of Labor and Employment jointly vent their ire on them without looking back that it was the same workers they now want to eject that at one point gave the company its bountiful earnings.

One must it bear in mind that the problem on how to save the company is not just a problem of the management, but also that of the workers. For sure there are many ways to cut losses, and companies that have reconciled themselves with that painful truth could only concede to retrenchment as their last option. There are other options like reducing, if not scrapping, all costly representations, allowances, and other unnecessary expenses that add up to production cost. Focusing on the status of the employees should come as last, and even that could well damage the image of the company as utterly ungrateful.

Instead, business establishments could embark on a company-wide wage reduction scheme. That tosses to the employees the choice between reduced wage and no wage at all. Surely, there would be no much problem for those receiving above the minimum wage, like the company executives, managers, supervisors and senior employees. Maybe the “no diminution of wage and benefits” practice could be set-aside in a new jurisprudence given the exigencies of economic survival.

Countries such as Germany and Japan value much the training and experience acquired by employees through years of working with the company. That is why every time the company experiences a recessionary downswing, the management and the union work long hours to map out strategies to save both the company and the employees, instead of just saving the company but dumping the employees. They realize that training new batch of employees, especially in technology-oriented and robotized companies, is more costly.

Thus, aside from drastic wage reduction, the management offers short working hours, cancel all overtime work, employ job rotation, require some of them to work for only three to four days a week, and at times just give a monthly allowance to those placed on a standby status. The option of securing the services of labor-only contractors is ruled out. In that one could see that such companies recognize the value of their experienced workers, and are bent in rehiring them once they are able to extricate themselves from the current financial quagmire.

By analogy, the retrenchment of the flight attendants by Philippine Airlines is sexist to be considered legitimate considering that they were hired not to work as belly dancers. The argument that some of those flight attendants are already old for their job is belied by the fact that passengers have more trust on older and experienced pilots they accompany.

Often, to soften the hearts of the grieving workers targeted for retrenchment, the management offers them an amount of separation pay of up to 200 percent or more, or “pampabulag”, as the workers would call it. It’s an offer they could not refuse, but betrays the claim that the company is experiencing a financial rough sailing. So, if retrenchment is unavoidable, then the additional premium is not the solution, just as it is unfair for employers to seek the cover of retrenchment to weed out from their ranks inefficient employees.

Besides, surveys show that retired employees and those who were targeted for early retirement but were given their lump sum separation pay, even with the added premium pay, often end up as virtual paupers five years after receiving them. Ninety percent of those who ventured to use their retirement pay to engage in business fail. Those lucky enough migrate to other countries. The grim result is the unusual high mortality rate among them either due to lack of financial resources to support themselves or due to financial despondency.

Unlike those who retired and receive their pension on a monthly basis, many of them live to enjoy a much longer life. That factor has been attributed to their financial stability. This underscores the need to prohibit private companies, the GSIS and the SSS from giving in lump sum the separation pay to retrenched employees just to induce them into accept gracefully their walking papers. –Rod P. Kapunan, Manila Standard Today

Month – Workers’ month

“Hot for workers rights!”


Solidarity with CTU Myanmar,
trade unions around the world,
for democracy in Myanmar,
with the daily protests of
people in Myanmar against
the military coup and
continuing oppression.


Accept National Unity Government
(NUG) of Myanmar.
Reject Military!

#WearMask #WashHands

Time to support & empower survivors.
Time to spark a global conversation.
Time for #GenerationEquality to #orangetheworld!
Trade Union Solidarity Campaigns
Get Email from NTUC
Article Categories