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Hisense offers SA staff loans as salaries amid COVID-19

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Multinational appliances and electronics manufacturer Hisense SA has confirmed it has introduced a “no work, no pay” policy for non-essential employees, offering salaries on a loan basis, during the current national lockdown.

ITWeb saw an internal memo sent to staff in which Hisense says it has been unable to trade from 26 March, due to the situation caused by the coronavirus (COVID-19), which resulted in the temporary shutdown of its business.

As a result, it has been forced to implement salary cuts, while providing all employees with either an advance or a loan on their salaries, while the company awaits government’s Temporary Employer / Employee Relief Scheme (TERS) pay-out.

“As you know, the company already implemented salary cuts from April 2020, whilst also applying to the TERS for relief, the value of which were paid to you in advance/on a loan basis,” according to the memo.

“The company, however, still has not received all the monies from the TERS advanced to you on a loan-basis in good faith. On the background of the information above, the company has to, unfortunately, inform you that we have no alternative as to continue with a ‘no work, no pay’ policy for employees that cannot fulfil their normal duties.”

While the national lockdown has moved from level five to level four, Hisense operations are still unable to resume as normal, and like many other companies, it cannot sustain business growth, the memo explains.

“Only once we reach level two, would everyone be able to resume their duties. We do not know how long it will take before the government makes a decision as to how quickly we will progress through these levels,” the memo continues.

Established locally in 1996, Hisense South Africa manufactures and sells home appliances, electronics and mobile phones.

The Chinese multinational company has a national footprint with its main offices in Midrand, Johannesburg, and in Century City, Cape Town. Its products are distributed to over 3 000 chain stores and 500 home appliance franchise stores across SA,and it exports products to Namibia, Mozambique, Zimbabwe, Malawi, Zambia, Botswana and Lesotho.

The company also has several factories in SA – in June 2013, Hisense launched its R350 million consumer electronics and home appliance manufacturing facility in Atlantis industrial park, Cape Town, which produces up to 400 000 refrigerators and televisions annually.

In an e-mail interview with ITWeb, a Hisense spokesperson explains the company has taken a blow during the lockdown and the new remuneration policy was introduced in order to “avoid retrenchments at all cost”.

The spokesperson confirms all employees who were not able to perform their core function were affected by the new policy.

“An e-mail was sent in April to notify all Hisense staff that salaries will be affected over the next three months due to non-trading conditions. We will pay all staff a minimum of R3 500 and we have applied to TERS on their behalf. The balance will be paid once received from the Unemployment Insurance Fund (UIF).”

A measure of last resort

As the deadly coronavirus pandemic rattles economies across the globe, it has devastated businesses across sectors, forcing some to either restructure or permanently close down, resulting in many employees without an income.

Last week, ICT firms Uber, Airbnb, Lyft and Telkom confirmed they have been forced to cut thousands of jobs as theyreconcile with the economic bloodbath caused by COVID-19.

Financial analysts have forecast a looming global recession, with governments and policy-makers cutting interest rates to stabilise economies suffering from the impact of lockdowns.

SA’s Department of Employment and Labour has created two temporary lay-off options for qualifying companies: the TERS, a financial support measure to support workers and employers during the COVID-19 lockdown; and the UIF as a reduced working time option.

Mehnaaz Bux and Shane Johnson, employment law experts from law firm Webber Wentzel, told ITWeb that during the current lockdown, employers should apply the no work, no pay principle as a measure of last resort.

Bux notes that in considering remuneration of employees during this time, employers should weigh up legal, moral and ethical issues as well as affordability in arriving at a decision that is in the interest of staff and the business.

“Before considering applying the principle of no work, no pay, employers should consider alternative measures such as reduced pay, payment of basic pay only and payment of an allowance/stipend,” Bux points out.

“These alternative measures may only be implemented by agreement with the employee, as an employer cannot unilaterally amend an employee's terms and conditions of employment.”

According to Johnson, the lockdown represents a decision imposed by government and it falls outside of the control of employers.

“To the extent that employees cannot work from home and are unable to return to work due to the level four lockdown restrictions, the employer may consider legally applying the principle of no work, no pay. To support its decision, employers can rely on the contractual principles of force majeure or supervening impossibility of performance,” states Johnson.

In terms of paying out salaries as loans, Johnson cautions that employers must be aware that terms and conditions of employment may only be changed following consultation and agreement with employees.

“If employees did not agree that their salaries were considered as ‘loans’ prior to payment of TERS benefits by the UIF, the subsequent notification by the employer may constitute a unilateral change to terms and conditions of employment.”

The UIF, an entity of the Department of Employment and Labour, says since 16 April, it has paid benefits of over R11 billion to more than two million workers in SA, through almost 162 000 companies that applied for claims on their employees’ behalf.

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