Employment myths for investor attention in Ghana

On Monday November 28, 2011, the Business and Financial Times newspaper published a news item which stated that investors claim that doing business in Ghana is adversely affected by high cost of hiring and firing workers in Ghana. In the recent Global Competitiveness Index Report, 2015/2016 by the World Economic Forum (WEF) it is found that Ghana’s urge to attract investment and business placed 119 out of 140 which is below that of 19 other African countries including Uganda (115), Senegal (110) Zambia (96), Cote D’ Ivoire (91), Botswana (71), Rwanda (58), and Mauritius (46), which is the most attractive/competitive African Country for investment and business.

According to the research paper, the Lead Economist at the WEF explained that because firing of workers is very expensive in Ghana, businesses and investors are not attracted to investing in Ghana. It is this statement and explanation that sets the tone for this week’s article. For it is important to interrogate some myths for employment in Ghana.  This article will discuss three common myths of international business perception about Labour/Employment in developing countries or the so called ‘third world’ countries such as Ghana. I will however use Ghana as the reference country.

Myth 1: Labour is Cheap in Ghana and Developing Countries

This is clearly a myth. Most employers will tell you that total labour costs in Ghana are quite huge. Indeed, it is not very different across the sub region. Though salaries may be low, the other labour costs make employment costs in Ghana quite expensive. Costs such as Recruitment costs, Various Allowances (over 15 different allowances for public sector workers), Employee Benefits such as Bonuses, 13th Month and Leave Payments, Medicals and Insurance coverage, Labour Taxes such as SSNIT and Income Tax, Clothing and Safety Apparel, Employee Transportation costs, Training and Development, and many more. Though our daily minimumwage of GH¢8.00 Cedis is low as compared to developed countries, the ancillary labour costs associated with such payment is not cheap at all.

For example, total labour costs per annum in Ghana averages around 30% of annual turnover.  Of course in the public sector it is about a double of that at the least.

Myth 2: The Ghanaian Worker is Lazy and Unproductive

On the surface, this statement may seem like a truism. Unfortunately, this is also false. The inefficiencies of the Ghanaian worker lie absolutely at the door step of the employer. I will explain. First of all, when investors or businesses set up their operations, they fail, based on bad labour advice, to put in place a detailed and robust Workforce and Human Resource Management structures. They would normally engage Human Resource persons who may not be qualified practitioners with little or no knowledge or education in managing human resources in Ghana. We find that even when they employ qualified practitioners, they fail to allow the professionals to work freely and continuously interfere in their work.

So these businesses begin operations on a wrong note – they hire workers without stringent workforce plans, human resources procedures and structures to manage the employees. For such organizations, employees are often unruly, law unto themselves, untouchable, undisciplined, fraudulent and unprofessional. And since the workforce is managed in an adhoc manner without structured human resources strategies for productive work, the workforce cannot be possibly as productive as it should be.

Secondly, in a hurry to make money, a lot of organizations operate without dedicated human resources departments or policies. They operate without stipulated employment letters, conditions of service and other contractual arrangements with employees thereby creating a high sense of insecurity within the workforce. Workers are terminated anyhow, paid over the table in cash wrapped in envelopes and workers are treated anyhow, insulted, used and abused while some workers are favoured over others unduly. Disciplinary systems, performance management and evaluation systems are non-existent and work rules are operational rather than behavioural in nature. How can such a chaotic organization possibly be as productive as it should be?

Thirdly, most businesses in Ghana fail to adopt contemporary production processes for their operations. More current and technologically advanced processing and production lines are shunned for cheaper, older and outmoded technologies which keep productivity at a much lower rate. Maintenance of equipment is not routine as required hence, endangering the lives of employees and rendering the workplace unfavourable for productive work.

Finally, uncoordinated work rules, Governance systems, worrying Leadership styles, unqualified and incompetent management teams (sometimes expatriates) enhance disunity and rivalries in the workplace resulting in escalated tension and prevalent workplace disputes. And these disputes cost time and money in resolution and eat away the productivity ‘pie’ for such organizations. Where proper workplace values, performance evaluation and disciplinary systems are in place, unqualified, incompetent and unruly employees will be effectively weeded out.

These same workers in Ghana who are referred to as lazy and unproductive travel outside the country and do so well in various fields of work – be it industrial, medicine, services or other fields of work. Some are quick to argue that Ghanaian workers have bad attitudes to work. But I say this that in a workplace or business environment where specific values and attitudes are inculcated and propagated with the support of effective performance evaluation and disciplinary systems, how can an individual employee continue to have bad attitude? If all organizations were monitoring and implementing strict disciplinary codes of conduct and procedures, I am sure employee attitudes would have shaped up by now and work ethics would have been far better than we have today.

But what we continue to see today are organizations that are hungry to make money, willing to use people, ready to break labour laws and regulations, determined to bribe or scheme their way through regulatory systems to make more money but only end up increasing their levels of inefficiency as well as reducing their potential productivity gains. It is a sad situation and I do not think it is the employees or Ghanaian workers who should take the blame for the low levels of productivity in Ghana and other developing countries.

The point is that labour is one of the three main resources for every business operation. How it is turned around at profit (labour productivity) is the business of the employer and not the employee.

Myth 3: Termination of Employment (Firing) is Expensive in Ghana

This is an interesting statement which must necessarily be interrogated for confirmation or otherwise. Termination of employment or ‘Firing’ for that matter is not necessarily expensive in Ghana. Rather, it is the unfair termination of employment that tends to be expensive. This is because where proven that an employee’s employment has been unfairly terminated, compensation is paid. At law, compensation for unfair termination ranges between 12 months and 24 month’s salary.

Let’s have a look at the ways in which employment may be terminated under the Labour Laws of Ghana.

Termination upon Dismissal for misconduct or non-performance:

This process normally begins with a suspected workplace offense, misconduct or non-performance. Upon the suspicion of misconduct, an employee may be required to undergo investigative suspension (interdiction) while the issue is verified and disciplinary processes arranged for the investigation and final determination of the matter. It is also possible for an employee to be terminated for continuously failing to meet the set and agreed performance standards of the job.

Termination due to abrogation of employment contract by agreement:

When a worker resigns from the job position, it simply means that the worker voluntarily seeks to leave and no longer desires to continue in the employment relationship.  Employer and employee may also agree to terminate employment when both decide to discontinue the employment relationship. Agreed exit entitlements apply in accordance with employment contract and company policy.

Termination due to Voluntary and Compulsory Retirement:

Voluntary retirement occurs when an employee upon attaining an agreed pensionable age, abrogates his or her employment contract in accordance with company and HR policy.  Compulsory Retirement is a mandatory retirement process at the age of 60 Years for public officers per the 1992 Constitution of Ghana.  The employment relationship self terminates upon attaining pension and payment of prior agreed exit entitlements apply.

Compulsory Termination due to Ill Health or non-performance

Where an employer finds that an employee is unable to continue in the job for which the employee was hired for medical reasons, the employer may request the employee to retire or resign on medical grounds depending on the circumstances of the case and the age of the employee. Very often, I have come across long term illness policies of organizations with tiered durations of 3 months sick leave on full salary, the next six months on half salary and so on. It may therefore be helpful if an employee is medically boarded as soon as the employer determines that the employee may not be able to work in the capacity in which s/he was engaged.

Termination due Redundancy:

Redundancy is an expensive exercise. Where an employer contemplates the introduction of major changes in production, programme, organization, structure or technology in a company that is likely to entail the termination of the employment of workers, the employer is required to consult the affected employees or their representatives and the Chief Labour Officer and take steps to provide relevant information including the reasons for any termination, the number and categories of workers to be affected and the period within which any termination is to be carried out. A negotiable compensation referred to as severance pay is supposed to be agreed and paid to workers as part of the exercise. Compensation packages range between 6 weeks to 12 weeks salary per each year of service. Other payments are negotiated as part of the redundancy package to employees.

Termination upon Death of Employee:

When an employee dies on the job, the employment relationship is over and automatically ended. The organization would normally pay the employees entitlements to next of kin.

The Myth

The above are the general modes by which employment in Ghana may be terminated legally. The Labour Act, 2003 (Act 651) requires that where an worker’s employment is terminated fairly, s/he must be paid termination remuneration which consists of the remuneration earned by the worker before the termination, any deferred pay due to the worker before the termination, and any compensation due to the worker in respect of sickness or accident.

This is the entire payment due to a worker who has been fairly terminated and you will realise that the termination remuneration is made up of monies already owed to the worker or what has been agreed between the worker and employer to be paid.

Employers, Businesses and Business Leaders should endeavour to consult, seek advice and guidance on the employment policy drafting and implementation of the entire Human Resource Management cycle ending with exit processes so that they avoid making mistakes and rendering the process expensive.

It is the errors in the HRM implementation processes that makes the termination process expensive. It is the mistakes and breach of the Labour Laws and Regulations that make the payment of compensation and hence the termination process expensive. Termination processes in Ghana are not expensive as compared to other countries because every employee related cost can be projected, budgeted and accounted for to the last pesewa.