Opinions Wed, 26 Jun 2013

Redundancy: Analysis of the Ghana Labour law

By Eunice Aidoo

Most employers claim their human resources are their most valuable asset, and thus formulate policies to ensure the best employees are recruited into their organisations. However when it is time for employees to exit organisations through redundancy, the process is mostly poorly handled.

It should be noted that people do not easily adapt to change; therefore it is advisable to handle change, in situations such as redundancy, with care as it has both psychological and physical effects on the wellbeing of both redundant employees (Mind 2005) as well as those remaining 'survivors' in the company after the redundancy exercise (Moore et al. 2008).

In this article, an in-depth analysis will be made of the redundancy process in Ghana in comparison to what pertains in United Kingdom. This comparison may be seen as unfair due to the developmental disparities between the two countries. However, no matter the level of development of a country, people have some fundamental rights to be treated fairly with respect and the right to have their health safeguarded. In addition, globalisation is bringing convergence to how things are done in different parts of the world. This includes Human Resource practices and other considerations although these views are still clouded by divergent views, politics and cultural values. Hence, if Ghana wants to develop as a nation into a fully-fledged middle income state which is what we aspire to be, then there is the need for such a comparison in order to learn from the experience of others and make the necessary adjustments so as to put measures in place to enhance productivity. Comparison of United Kingdom – Ghana Redundancy law

According to Acas (2012), redundancy has two different meanings in the UK employment law. One is to establish entitlement to redundancy payments and the other is the right to be consulted. In addition, Acas (2006) states that, for the purpose of redundancy payment under the Employment Rights Act 1996, redundancy occurs when employees are dismissed due to any of the following:

• The employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was so employed; or

• The employer has ceased, or intends to cease, to carry on the business in the place where the employee was so employed; or • The requirements of the business for employees to carry out work of a particular kind has ceased or diminished or are expected to cease or diminish; or • The requirements of the business for the employees to carry out work of a particular kind, in the place where they were so employed, has ceased or diminished or are expected to cease or diminish.

For the purpose of the right to be consulted, redundancy is seen as:

"Dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related." This definition might include, for example, a situation where dismissals are not related to the conduct or capability of the individuals but are part of a reorganisation where there is no reduction in the overall numbers employed because the employer has recruited new staff”. On the other hand, redundancy in Ghana is defined by Section 65(1) of the Labour Act 2003, (Act 165) as:

“When an employer contemplates the introduction of major changes in production, programme, organisation, structure or technology of an undertaking that are likely to entail terminations of employment of workers in the undertaking”.

It can be evidenced from the above definitions that both countries acknowledge redundancy as a permanent termination that is not related to the employee’s performance but a Human Resource practice carried out as part of the business restructuring process to ensure organisational efficiency. It can also be deduced further from the above that there is not much difference between the meanings of redundancy in both countries. The major difference has to do with the procedural path adopted in both countries. Whereas the UK has more precise redundancy measures and processes stated in its laws, the redundancy laws in

Ghana are mostly left to the interpretations of representatives of both employers and employees. For instance although the law in the UK does not emphatically state when to start consultation, it states that it should start as early as possible and be:

“At least 30 days before the first dismissal take effect if 20 to 99 employees are to be made redundant at one establishment over a period of 90 days or less. At least 90 days before the first dismissal takes effect if 100 or more employees are to be made redundant at one establishment over a period of 90 days or less” (CIPD 2012). This provision is however subject to change from 90 days to 45 days on 6th of April 2013. On the contrary, the explanation of redundancy in the Ghana Labour Act 2003, (Act 165) does not state any clear period for consultation to be carried out by stakeholders. Thus Section 65(1a) States that employers should:

“Consult the trade union concerned on measures to be taken to avert or minimise the termination as well as measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment.”

This makes the law subject to several interpretations as to the specific period of consultation which may at times result in conflict among the parties as they will contemplate on the appropriate period. Furthermore, whilst the United Kingdom’s laws on redundancy specify some of the measures to be taken such as alternative employment and the likes, as well as issues to tackle during the period of consultation, the Ghana Labour Act 2003 (Act 165) leaves this in the hands of the stakeholders involved to discuss and find a way around which may sometimes lead to disagreement, time wasting and consequential litigation by members. Hence a process that is supposed to be short and free of litigation eventually ends up taking longer than expected by members due to misunderstanding and ambiguity of the Labour Act.

Again, S 65(2b) of the labour Act 2003, Act 165 defines redundancy pay as: “Entitlement to be paid by the undertaking at which that worker was immediately employed prior to the close down, arrangement or amalgamation, compensation, in this section referred to as redundancy pay”.

However, the law does not specify the amount to be paid as the redundancy pay or what should constitute this amount .It however states in Section 65(4) that such amounts should be negotiated by the trade unions and the employers. This implies that the onus lie on the negotiation skills of both parties which may result in conflicts and misunderstandings between them. Thus, a process which is supposed to be a good Human Resource management practice ends up being tagged as ‘evil’ by employees and their unions. Also, unions instead of negotiating, eventually end up litigating employers because no premise has been set on how the redundancy pay should be calculated by the labour Act as compared to the UK. This is because in the UK, there is statutory redundancy pay, a well-defined method of calculation as well as an exemption clause for those with less than two years of service.

This helps facilitates the redundancy process by making employees aware of what they are entitled to receive and avoid litigations as well as helping tribunals in settling redundancy dispute when an employee is not satisfied with their entitlements. In view of this, the labour law of Ghana could be given a second look on the issue of redundancy to clarify these ambiguities as well 5 as set a premise to be used by trade unions and employers so as to enhance good employment relationships. Again, one significant aspect of the Labour Act 2003 (Act 165) of Ghana mentions the provision of alternative work for employees, but how many employers offer this opportunity to employees and how many employees know of the existence of such an opportunity which makes it questionable. This could be because it is stated as an example and not an obligation for employers to comply with whereas in the UK it is an obligation for which employers must show evidence of such compliance to the employment tribunals. Furthermore, another reason for most employees in Ghana not demanding their right on the clause of alternative work could be that employees become attracted by lump sum payment of money usually due them because of the economic conditions, the Ghanaian culture and other social issues. Conclusion In a nutshell, it can evidenced that redundancy is a Human resource management practice which every organisation will have to go through at some point regardless of its level of development. Thus it is needed by organisations at some point to survive in this changing business environment and globalisation. Hence, there is the need for a clearly stated procedure to handle it in order not to impact negatively on employees, and to ensure a satisfactory or acceptable outcome for those affected. The UK has a well-structured procedure for employers and their representatives on one hand, and employees and their representatives on the other hand to follow in order to ensure that each party is satisfied with the process.

The clause on redundancy in Section 65 of the Labour Act 2003, (Act 165) should therefore be reconsidered for possible revision to take into account some of these critical issues which does affects the social, psychological well-being and human rights of employees.

6 By Eunice Aidoo

MSc Human Resource Management/ Development Student Sheffield Hallam University – United Kingdom

Columnist: Aidoo, Eunice