Less painful means of saving on labor costs

It is the employer’s prerogative to save on labor costs, especially during uncertain or turbulent times, such as this Covid-19 pandemic. It may resort to retrenchment or closure or cessation of business. However, depending on certain crucial factors, an employer may still opt for less drastic measures.

Reduction of working hours is the least painful and more palatable to employees. Before its implementation, the employer must take into consideration the following: the arrangement was temporary, it was a more humane solution instead of retrenchment of personnel, there was notice and consultations with the workers and supervisors, a consensus were reached on how to deal with deteriorating economic conditions and it was sufficiently proven that the company was suffering from losses.

On the other hand, “lay-off” is an act of the employer of dismissing employees because of losses in the operation, lack of work, and considerable reduction on the volume of its business. However, a lay-off must only be temporary. It should not last longer than six (6) months. After the period of six (6) months, the employees should either then be recalled to work or permanently retrenched following the requirements of the law.

The employer must also act in good faith, that is, one which is intended for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under the law or under valid agreements.

In both cases, failure to comply with any of said requirements would be tantamount to dismissing the employees, making the employer responsible for such dismissal.