“Surviving” After Retrenchments

After retrenchment has taken place in a company, surviving employees typically suffer from something akin to temporary post-traumatic stress.

They may experience feelings of powerlessness and, subconsciously, being betrayed by the organization to which they offered their allegiance.

These emotions can be exasperated by the confusion caused by changes in management, differing responsibilities, and increased workload, merging with other teams, and other events associated with downsizing.

Commitment and performance

The result is that they experience higher levels of stress that foster a negative attitude towards organizational commitment and reduce job performance.

So how can employers break this pattern and motivate their workforce to become productive again?

In a 2004 a study titled Perceived Control as an Antidote to the Negative Effects of Layoffs on Survivors’ Organizational Commitment and Job Performance, researchers from several US universities measured the effects of perceived control on workers one month after downsizing had taken place at a selected company.

The paper reports that remaining employees were more negative when retrenchments were thought to have been handled unfairly, trust in management was low, survivors were emotionally close to those retrenched, and the threat of future layoffs was relatively high.

However, in all cases, if staff felt they had some form of control over their circumstances, they were less haunted by perceived threats to their wellbeing and were better able to resume working normally.

It follows that employers must find ways to provide that sense of control. With their budgets being constrained, an ideal option is to offer workers more say over how they are remunerated.

Flexible benefits

Flexible benefits are a remuneration model that allows employees to restructure their contributions to benefits on a sliding scale.

This means they can decide what percentage of their pay to allocate towards compulsory employer-provided benefits in general and how much to reserve as cash for their living expenses.

Under post-retrenchment circumstances, the approach empowers employees to take control of something important to them; in the midst of a situation over which they may have little say.

Employees whose lifestyle needs change over time or even suddenly, are now equipped to deal with their circumstances as they see fit.

For example, a CEO whose wife was retrenched was able to continue paying his bond by temporarily reducing all compulsory pension savings contributions to a minimum amount and taking thereby increasing his take-home cash.

A single person may want more cash for entertainment; a newlywed couple may want more money for a home deposit; nursing mothers typically need better medical aid for their babies; those suddenly afflicted by a chronic illness may want to increase their healthcare benefits and dread disease insurance cover; and people nearing retirement might opt to go for the tax benefits of increasing their pension contributions.

Flexible benefits can be mixed and matched accordingly to each employee’s personal and financial requirements.

The types of benefits an employer offers are also important. An educational bursary scheme, for instance, allows employees or certain classes of their dependent children to get a tax break and thus increase the employee’s take-home pay.

Employers should keep abreast of benefits that can legally be structured into their remuneration package which would assist their staff to gain value more from their pay.

In addition, the fact that an employer offers flexible benefits, also makes employees feel valued as it underscores the unique circumstances of each employee.     

Statement of benefits

What about those employers who already provide flexible benefits?

They can still promote the notion of control by emphasizing how employees can take command of their lifestyle needs by properly utilizing their flexible benefits, which directly impacts their take-home pay.

The leading employers compile a customizable benefits statement for each employee at a predefined interval, for example, every quarter.

A statement is a powerful tool for highlighting each worker’s earning profile and benefits contributions.

Surprisingly, employees often aren’t even aware of the benefits they receive or how to manage them effectively.

So the statement can create the opportunity for employers to start a discussion around the value employees receive in return for their work and how to leverage it to their advantage.

Again, the effect is that the employees will gain a sense that there is something they have control over and can focus on in circumstances they still consider difficult or threatening.

Employees can also receive training from a remuneration specialist on understanding flexible benefits and the direct impact on their package and take-home pay.

A financial services provider will also be able to provide guidance on optimizing the ideal mix of employer-provided benefits for their current lifestyle needs, as company-provided benefits are almost always more cost and tax-effective than employee personally procured benefits.

That their employer took such interest in their wellbeing signals that they are valued by their organization.


In the aftermath of retrenchments, employers with limited budgets must help stressed workers reignite their commitment and productivity. They can start by offering flexible benefits to give staff a sense of control and emphasize this control by regularly issuing benefits statements or providing training on benefits management

Authored by: Tanya Tosen, Tax and Remuneration Specialist at Tax Consulting South Africa