Death By Probation

Death By Probation

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Or will most end up being held for ransom by their employees who understand the labour law better than they do? This is always a concern for SMEs, where poor employment choices can mean huge costs for the smaller business owner.

One naturally interprets the purposes of the probationary period as a time period that affords employers the opportunity to evaluate an employee’s performance before confirming an appointment. It is then natural to extrapolate out of this concept that the employer would easily be able to dismiss an employee who is on probation.

Most entrepreneurs assume that the probationary employment period is basically a licence to dismiss the probationary employee on the basis of non-performance, misrepresentation of skills or ‘cultural fit’. Not so. In fact – there is very little difference between the rights of an individual who is fully employed and one who is on probation.

Being exposed to over 300 small businesses in the various Raizcorp programmes at any one time, the same mistakes are made by entrepreneurs time and time again in relation to how they hire and fire.

When is right, right?

A case in point was an affiliate who recently fired a probationary employee for these very reasons, as well as excessive absenteeism. The employee had wreaked havoc on the business by missing deadlines, which resulted in the exasperated business owner summarily telling the employee to ‘pack their bags’ and he considered the matter closed.

A few months later, the owner was slapped with a secondment to the CCMA for unfair dismissal of the employee in question.

 

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Sadly, the employer’s actions were in direct contravention of South Africa’s labour laws. According to the law, the employer was required to undergo a series of HR-related measures before finally dismissing the employee, and none of these measures were taken.

Due to the marginal profitability of the business, the CCMA’s demands have resulted in two alternatives for the small business owner – either he concedes and pays out the negotiated settlement fee or he is forced to retain the employee with back pay, yet both alternatives make the business unprofitable and unsustainable.

The time spent at the CCMA defocused the entrepreneur resulting in further damage to the business. He decided to close the business and seven other jobs were lost.

Another incident involves a small business owner who had employed a sales manager that was clandestinely operating a competing business by utilising the employer’s business as a feeding trough.

The employee was undercutting his employer’s costs to secure contracts and tenders for his own business from his employer’s client base. These actions were discovered by the employer and the probationary employee was summarily dismissed.

Again, the small business owner failed to complete the requisite steps in order to dismiss the individual legally – leading the individual to take the employer to the CCMA for unfair dismissal. This was done despite the fact that the individual had effectlively been caught stealing from his employer and was within his probationary period.

The employer was faced with the choice of spending a small fortune in legal and travelling costs to fight the case or paying the individual a slightly smaller sum and walking away. The employer made the payment and this outlay almost crippled his business.

Mitigating risks

These stories have become all too familiar; the small business-owner who risks his livelihood due to a poor understanding and application of labour law. It feels wrong on so many levels.

This has become a huge problem for small and medium-sized businesses. These businesses most often do not have the resources and skills required to navigate through tricky labour-related issues such as a conflict in the probationary period of an employee. This leaves the small-business owner vulnerable to opportunists who know how to manipulate this loophole in the legal system to their advantage.

The suggestion is not that the labour laws be amended to strip labour of its rights further, as this would leave big business open to abuse and exploit their workforces at will, which is why the current labour laws were developed.

Neither is the suggestion that two separate sets of labour laws are adopted; one that would apply to big business and one that would apply to small business. This would open Pandora’s Box from an enforcement perspective.

Giving SMEs a break

The suggestion is merely that the legislation around the probationary period be amended to be less onerous on the employer to prove the employee’s lack of performance and/or misrepresentation of skills. This would create an elegant and simple solution to a situation which has seen many small businesses being held ransom by errant employees and, ultimately, being destroyed by the legal costs and time required to fight these incidents.

Running a small business is a tough and risky endeavour. We all know the statistics for survival of a small business. By re-thinking the labour law’s ‘probation clause’ we would reduce some of the risks inherent to being an entrepreneur, resulting in a higher survival rate and, consequently, a higher employment rate. Surely this is worthwhile consideration for our Government?

Allon Raiz
Allon Raiz is the CEO of Raizcorp, the only privately-owned small business ‘prosperator’ in Allon Raiz is the CEO of Raizcorp. In 2008, Raiz was selected as a Young Global Leader by the World Economic Forum, and in 2011 he was appointed for the first time as a member of the Global Agenda Council on Fostering Entrepreneurship. Following a series of entrepreneurship master classes delivered at Oxford University in April 2014, Raiz has been recognised as the Entrepreneur-in-Residence at the University of Oxford’s Saïd Business School. Follow Allon on Twitter.