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Covid-19

Newsflash: Retrenchment Post The State Of Emergency

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In terms of regulation 30E of the Covid-19 Regulations 1 (the Regulation), the retrenchment of employees during the state of emergency is prohibited. The State of Emergency is set to end on 30 September 2021 and therefore the prohibition against retrenchment will be lifted. Employers will be able to commence the retrenchment process in terms of Section 25 of the Employment Act 2 (the Act).

For a retrenchment process to be lawful it must satisfy both procedural and substantive fairness.

Substantive fairness speaks to the commercial or business justification for the retrenchment. In order for an employer to commence the retrenchment process there must be a commercial or business justification for the retrenchment. In the case of Innocent Chinu and 13 others v Pelican Moving Company, the Industrial Court held that “there is no distinction between operational requirements for purposes if making profit and for the purposes of ensuring survival of a business”. Though the employer has the managerial prerogative to economise its business, this prerogative must be exercised fairly 3 . Substantive fairness requires that:

  •  there must be a valid commercial rationale or justification for the retrenchment. If it turns out that the real reason was to victimise them then the commercial rationale for retrenchment does not exist;
  • employees must, in good time, be given relevant information in order for them to understand the reasons why their company is considering retrenchment; and
  • the employer must consider ways to avoid retrenchment or minimise its effects. The employer must show that all other alternative steps to prevent retrenchment or limit its scope have been duly considered and implemented.

Procedural fairness relates to the procedure followed by the employer prior to retrenching an employee. Procedural fairness requires that 4 :

a) once the employer forms the intention to retrench employees he shall immediately give written notice of that intention to the Commissioner of Labour and every employee who will or is likely to be directly affected by the retrenchment;

b) the employer must undertake consultations with the employees or union. Consultation must be done in good faith and not simply to afford the employee an opportunity to comment on a decision that has already been taken. The principal purpose of the consultations is threefold 5 :-

  •  for the parties to seek ways of avoiding or averting the need to terminate the employee’s employment;
  • if the retrenchment proves unavoidable, the parties should consult on a fair
    selection criterion and a retrenchment policy to be applied; and
  • to consult on ways of alleviating the hardships of retrenchment e.g a reasonable severance package and possible alternative employment opportunities within the business.

c) in terminating employment contracts, the employer, wherever reasonably practicable, must comply with the principle of first-in-last-out. In applying this principle the employer must take into account the need for the efficient operation of the company and the ability, experience, skill and qualifications of each employee concerned. Therefore a more skilled employee who recently joined the company may be retained due to the company’s requirements and a longer serving employee who is less skilled may be retrenched;

d) if within six months after retrenchment, the employer seeks to employ workers for occupations which were the subject of the retrenchment, the employer must give priority to the retrenched employees to such extent as it is reasonably practicable. Failure on the part of the employer to observe either procedural fairness or substantive fairness, or both, may invalidate the retrenchment.

Failure on the part of the employer to observe either procedural fairness or substantive fairness, or both, may invalidate the retrenchment.

Should you require any assistance with Employment Law and terminations, please feel free to contact us at info@peolegal.co.bw or +267 3975779.

The information contained in this newsflash was intended for our clients and correct to the best of the author’s knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.

Newsflash: Taxpayers in Botswana granted Tax Amnesty for the year 2021-22

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Tax amnesty is a temporary scheme undertaken by the Government in order to relieve the taxpayer from the burden of paying tax penalties and interests for a specified period.

In terms of Section 112 (2) of the Income Tax Act [CAP 52:01] (Income Tax Act), as read with Section 77 of the Value Added Tax Act [CAP 50:03] (VAT Act), the Ministry of Finance and Economic Development has granted tax amnesty to eligible tax payers for the period 1 July 2021 to 31 December 2021 (the Amnesty Period).

During the Amnesty Period, tax payers are relieved of all accrued interest and penalties  under the VAT Act and Income Tax Act on condition that the principal tax amount (or any portion owing thereof) is paid in full. Subject to the eligibility of a tax payer, once the principal amount is paid all penalties and interest are written off.

Tax Periods Covered 

For purposes of  the Income Tax Act, the Amnesty  Period applies to tax years prior to and including the 2020/21 tax year.

For purposes of the VAT Act, the Amnesty Period applies to tax periods prior to 1st July 2020.

Scope of the Tax Amnesty

The tax amnesty covers income tax including corporate, PAYE, and other withholding taxes but excludes penalties levied due to a failure to furnish transfer pricing documentation. Under the Value Added Tax Act, the tax amnesty applies to all penalties and interest charged in respect of overdue amounts.

In order to benefit under the tax amnesty scheme, a tax payer must:

  • be an eligible person;
  • have paid the total principal tax and had a penalty and/ interest liability or had no principal tax but had a penalty and interest liability; and
  • have notified the Commissioner General of payment of the principal tax liability within 7 days of payment.

Eligible Persons

The tax amnesty scheme shall apply to any person that:

  • has an outstanding principal tax debt that has a penalty or interest liability
  • has paid a portion of her tax liability, but has not paid all or part of her penalties or interest
  • has paid the principal tax but has not paid his liabilities or interest
  • has outstanding interest and/ or penalties only
  • has not filed a tax return for a period covered by the amnesty
  • has not registered for any relevant taxes (they will not be charged penalties for late registration)
  • has lodged an objection against  any assessment with the Commissioner General
  • has lodged an appeal to the Board of Adjudicators, the High Court or the Court of Appeal

For more detailed information, visit this link: PDF: 2021 INCOME TAX AND VALUE ADDED TAX AMNESTY GUIDELINES

Please do not hesitate to contact us on info@peolegal.co.bw or +267 3975779 for all your tax law related needs.

The information contained in this newsflash was intended for our clients and correct to the best of the authors knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.

Corona-virus (Covid-19) Legal Updates – Variation of Terms and Conditions of Employment

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Following the declaration by the World Health Organisation of the Covid-19 pandemic as a public health emergency the Government has implemented a six-month state of emergency effective 2nd April 2020 (the SOE). During the SOE a national lockdown has been declared and this has had an impact on Botswana’s economy. Economist Dr. Keith Jeffries, has opined that as a result of the lockdown, Botswana’s economy has lost BWP10.8 Billion and this economic slowdown has affected households, businesses and Government. Businesses ability to fully operate and generate revenue is under strain. Under normal circumstances, most businesses would reduce their workforce through either terminations or retrenchment. However, in terms of the Emergency Powers Covid-19 Regulations 2020 (Emergency Powers Regulations) employers are not allowed to terminate or retrench employees under the SOE.

In terms of the Emergency Powers Regulations movement of persons has been restricted resulting in the suspension of business operations and/or reduced revenues. To counter the adverse economic effects, businesses have amongst other things:

  • reduced employee salaries;
  • forced employees to take unpaid leave; and
  • reduced working hours and/or implemented shift working hours.
All of the above and/or related examples where the employer has unilaterally amended the essential nature of a contract of employment is a variation of terms and conditions of employment. In order for such variation to be valid the variation must be done lawfully.  In terms of the law, an employer is not allowed to unilaterally amend an employee’s terms and conditions of employment unless:
 
  • there are sound commercial reasons for doing so; and
  • the employer has negotiated the matter in good faith through a fair procedure, which requires prior consultation with employees.

If an employer changes terms and conditions unilaterally and without following the above procedure, the employee has an election either to resile from the contract or to sue for damages in terms of the contract. Subject to complying with the above, management retains the prerogative to make the final decision as regards to changes to terms and conditions of employment if the parties cannot agree to such changes.

Considering the impact the SOE will have on a business’s ability to normally function we recommend that you seek legal advice on how to effectively and lawfully vary an employee’s terms and conditions of employment.

Feel free to contact me on tebogo@peolegal.co.bw or alternatively call +267 397 5779 if you any questions on the above.