Lay-off can be beneficial to both an employer and an employee, as the employer gets to pay less in wages and other benefits. In addition, the employee still has job security and some wages and benefits to see off a crisis period when jobs may not be available elsewhere.
In the wake of the current Covid-19 pandemic, the government of Bangladesh has extended the earlier declared national holiday till May 5, 2020. The authorities have ordered to close down all the government as well as private offices during this period.
All shops except hospitals, pharmacies, kitchen markets will remain closed and transportation services will be very limited during this period. The government has also advised the citizens not to go out except for emergency reasons.
Only the companies associated with emergency supplies like food, medicine and technology-based companies are exempted from the purview of what is practically a "lockdown".
As such, businesses are facing the burning question – what now?
How are they going to pay the salaries since the economy of the country, along with the world, has come to a standstill. What to do if they cannot afford to pay their employees anymore? How to retain their employees without having to let them go?
Even after the public health situation improves, how to deal with the lack of economic activity caused by a potential global recession? In this unprecedented situation, it is important to look at what the Bangladesh Labour Act (BLA), 2006 has in store for employers.
Stoppage of work
According to the provisions of BLA, an employer is entitled to stop the work of any particular section or the whole establishment due to any "epidemic".
Since the World Health Organization (WHO) has already declared COVID-19 as "pandemic", it can easily be termed as an epidemic to satisfy the provisions of BLA, 2006.
The condition is that such stoppage cannot extend beyond three working days.
During the period of stoppage of work, if it lasts for more than a day, the workers will be entitled to their respective wages. However, casual workers' will not be entitled to such wages. For the affected piece-rated workers, their average daily earnings in the previous month shall be taken to be the daily wages.
However, this provision of "stoppage of work" may not be applicable in this situation as the COVID-19 crisis is continuing and is expected to linger much longer. As such, the mechanism of "stoppage of work" is not a suitable one for employers for this current crisis.
A mechanism now being used around the world is to force employees to use earned annual leave days. The obvious benefit from an employer perspective is that workers going on leave during a lockdown or low-demand period will mean more workers will be available when the situation returns to normalcy later. However, the BLA does not provide any mechanism to force workers to go on leave, whether paid or unpaid. So even if an employer intends to use this mechanism, it must be upon mutual and informal negotiation with workers.
A method being used globally to cut labour costs during the current economic shutdown is temporarily laying off workers.
As per the BLA, lay-off means failure, refusal or inability of an employer to employ workers due to shortage of coal, power or raw materials or accumulation of stock or the breakdown or malfunction of machinery.
As general holidays are continuing and transportation services are very limited to emergency supplies, it is probable that shortage of raw materials might occur and employers may have to lay-off its employees to reduce its business loss.
The first period of lay-off can extend up to 45 days. The lay-off period may then be extended for periods of 15 days.
During the first 45 day lay-off period, workers laid off are entitled to half of their basic wages and dearness allowance and ad-hoc or interim wages.
They shall also be entitled to the full amount of housing allowance, if any that would have been payable to them.
It is pertinent to note here that the laid off workers will not be entitled to the compensation for the weekly holidays in between the laid off period.
During subsequent periods of lay-off after expiry of the first 45 days, laid-off workers will be entitled to a quarter of their basic wages and dearness allowance and ad-hoc or interim wages, along with full housing allowance.
Lay-off is beneficial to both an employer and an employee, as the employer gets to pay less in wages and other benefits.
In addition, the employee still has job security and some wages and benefits to see off a crisis period when jobs may not be available elsewhere.
In order to qualify for lay-off, a worker must be one other than a casual worker and must have completed at least one year of continuous service.
The employer is responsible for keeping a muster-roll of laid-off workers during the period.
In case the crisis of COVID-19 and the resulting economic downturn and global fall in demand persists, the employers may think of retrenchment of workers.
Some employers may even consider retrenchment of certain workers to reduce costs.
Retrenchment means terminating workers on the ground of redundancy.
In case of retrenchment, if a worker is employed for at least a year, the following steps are required to be followed :
i) One month's notice in writing indicating the reason of retrenchment or wages in lieu of such notice.
ii) One copy of the notice is to be sent to the chief inspector and another copy to the CBA representative, if any.
If the retrenchment is on the expiry of a lay-off period, no notice is necessary but the employer must pay additional 15 days wages or gratuity, whichever is higher.
The retrenched workers will be entitled to compensation of thirty days wages for their every completed year of service or gratuity, whichever is higher.
The BLA requires that after a worker is retrenched, if the employer is prepared to appoint new workers within a year of the retrenchment, they must send written notices to the last known addresses of the retrenched worker, asking them to apply for re-employment. If the retrenched workers reapply, they are to be given priority in the appointment process.
The BLA 2006 provides a fair procedure for employers to weather the storm and give workers as much security as possible.
But the global crisis brought by the Covid-19 is here to stay for some time, if not as a public health issue, but as a trigger for recession, which will affect economies around the world.
Bangladeshi employers, being reliant upon global demand for products, will see fall in production and would require significant reductions in their workforce.
The government's Tk 5000 cr will certainly encourage export-oriented employers and give them impetus to keep their workers, but the extent to which it will help in the long run is yet to be ascertained.
The stimulus package does not oblige any employer to apply for it and considering the fact that it is a loan (and not a grant) to be repaid with interest, albeit small, it remains to be seen how many employers avail it. For now, we hope for the best.
Saqeb Mahbub is a Partner and Wahid Sadiq Khan is an Associate at Mahbub & Company