eBusiness Weekly
Golden Sibanda
The viability and future of Turnall Holdings could be thrown into turmoil after the Ministry of Public Service, Labour and Social Welfare ordered the listed roofing products manufacturer to reverse the 30 percent cut the company effected on employees’ salaries arguing that the decision had no legal basis.
The order by the ministry for the salary cut reversal applies for the period July 1, 2017 to date. The decision comes after the feuding parties in the case had earlier reached an impasse in mediation at their national employment council (NEC), hence referred the case for mediation at the ministry of Labour.
The Zimbabwe Stock Exchange (ZSE) listed roofing materials and piping products manufacturer senior executives are on record, not long ago, saying that if they reversed the cost cutting, especially reducing employee salaries, it would plunge back into loss position, which could threaten its going concern status.
Turnall said the salary cuts were first effected on senior management and board directors (Fees) before it was cascaded down to lower rank employees. The ZSE listed firm said its NEC graded lower level employees are the ones that have been contesting the salary cuts since the middle of last year.
This comes after Turnall recently announced that it concluded payment arrangements with key creditors it owed US$29 million in a crucial deal that will go a long way in restructuring the company’s capital structure.
Market reports also recently indicated that firm was failing to agree with FBC, BancAbc and CABS, which had combined claims against the company of U$7,5 million.
Turnall’s cost cutting measures
Turnall, the ministry said in its judgment, unilaterally cut salaries for all national employment council grades grade starting July 1, 2016 arguing it was part of cost cutting solution the company was taking to survive viability constraints.
Other measures entailed reducing the head count, multi-skilling, negotiating with service providers for price cuts, freezing recruitment and termination of contracts for 53 employees.
Further, Turnall also had part of its onerous debts taken over by the Reserve Bank of Zimbabwe’s special purpose vehicle, Zamco, which helped firms that exhibited potential to recover if they debts were removed.
The company also received funding assistance in terms of the distressed and marginalized arrears fund (DIMAF).
As such, earlier in 2015 the company had reportedly retrenched about 55 workers as part of cutting costs and ensuring that it survived the difficult economic environment. Again, in 2016 Turnall laid off a further 68 workers.
The ministry of labour said Turnall directors communicated with workers that they had no option, but to cut costs from July 2016 to July 2017 to save the company from sinking and that they would, thereafter review the situation and the cost cutting measure.
However, the company proceeded with the costing cutting measure of unilaterally reducing salaries which workers had resisted from the time the company made the proposal. This was clearly in violation of the right, as final communication on the inevitability of this measure was also delivered towards the end of the month in which it was to take effect.
While the company insisted that the cost cutting measure, of cutting employees salaries by as much as 30 percent, was undertaken with prior consultation and agreement of the workers, the employees representatives in the joint works council argued the solution was never mutually agreed on.
At the time the cost cutting was implemented, Turnall said it was in five months salary arrears, but was up to date when the matter was referred for conciliation at the ministry.
Turnall also averred that the Labour Act provided for the employer to consult the works council, but not for it to seek the approval of workers when it was the one that bore the business risk.
As such, the Ministry of Public Service, Labour and Social Welfare said that it would give Turnall the benefit of doubt for cutting salaries between July 2016 and July 2017.
Salary cut after July 2017 illegal
However, the Ministry of Public Service Labour and Social Welfare said since the company did not deliver on its promise to review the position 12 months later, its argument for continuing with the cost cutting measure on the basis that it was still not financially sound had no legal basis.
“It is not disputed that the respondent was suffering from financial constraints. The tribunal’s view is that respondent was entitled to find ways in which to save the company from collapse and at the same time avoid retrenching the extreme workforce. However, the respondent was also entitled to institute whatever measures in a lawful manner. Section 12d (2) of the Labour Act provides for a period of 12 months that should not be exceeded.”
The ministry’s tribunal said considering the condition of the company found itself in, the fact it consulted workers and communicated the intention to cut workers’ salaries, though without agreement of the workers or their representatives, the company should be given the benefit of doubt on whether it did the right thing.
“However, for the period after 1 July 2017, after expiry of the stipulated 12 months in terms of section 12D, continued reduction of salaries becomes questionable becomes questionable, as there is no legal basis to support such action,” the ministry tribunal ruled.
“It is the finding of this tribunal that the continuance of the cost cutting measure after July 2017 is unlawful. The employees are entitled to their salaries as per collective bargaining agreement for the fibre cement manufacturing industry of Zimbabwe from July 1, 2017 to date.”
2017 full year financial performance
In the year to December 31 2017, Turnall’s turnover increased 12 percent to $19 million compared to $16,9 million in 2016, while sales volumes increased by 9 percent, a first after three years of consecutive declines.
During the period, production volumes increased by 32 percent due to improved working capital management and improved raw material stocks availability.
