Willard Ngwenya, a telephone technician for Telkom SA, works on a faulty telephone line in Benoni, South Africa, on Wednesday, May 7, 2008. Telkom South Africa Ltd., is Africa's largest fixed-line phone company. Photographer: John Hogg/Bloomberg News

The looming retrenchments at Telkom are headed for the courts, where the multibillion-rand conglomerate could end up defending itself against several thousand cases of unfair dismissal.

The country’s largest fixed-line operator has anticipated that 2 635 employees would be retrenched as part of the restructuring programme undertaken to resize its high human capital costs, which have been highlighted against declining revenue.

A confidential retrenchment notice in Business Report’s possession signed by Thami Msubo, the company’s chief of human resources, highlights how over the past five years the human capital cost has been on an “upward trajectory” while revenue has remained flat or declined steadily.

This is despite initiatives to spur short-term profitability and long-term sustainability with pilot projects that focus on customer-facing functions such as call centres, Telkom Direct shops and field force operations.

According to the notice, “given the cost contribution of managerial and specialist employees to human capital cost, flattening the organisational structure itself will not be sufficient. The number of management and specialist employees servicing our customers will also require a review.”

This is contrary to the claim made by Telkom in the media that the “company is not targeting an explicit number of individuals, but is aiming to reduce the amount of management layers and achieve an employee cost:revenue ratio of 25 percent over the next five years”.

According to the company, employee costs account for 30 percent of total revenue.

Marius Croucamp, a spokesman at Solidarity, which has members at Telkom, said another issue was that it was unconstitutional and tantamount to unfair dismissal for Telkom to initiate retrenchments based on employment equity because workers would be dismissed based on race.

He said Telkom did not have a coherent employment equity plan, and that it refused to disclose how many of the workers targeted for retrenchment were white or black. The union would take the matter to the Labour Court if Telkom went through with the restructuring.

“About 2 600 managers were given notices and we had deliberations with Telkom, which were deadlocked. We are now in the process of taking the matter to the Labour Court because the criteria that were used for the retrenchments are based on race,” he said.

Some of the unions operating in Telkom, such as the Communication Workers Union and the SA Communications Union, have warned that Telkom planned to retrench as many as 9 000 employees out of a workforce of 19 000.

But Telkom has hit back, refuting those claim as baseless. It also rejected the notion that race was used as criterion to enforce retrenchments.

Pynee Chetty, a spokesman at Telkom, said: “The fact is that Telkom’s focus is on retaining the right skills for its turnaround strategy and will consider several criteria throughout its restructuring process.

“These criteria include qualifications and experience, employee potential, the last-in-first-out principle when more than one employee qualifies for appointment into the same position and employment equity.”

Telkom’s shares closed unchanged at R49.49 on the JSE yesterday, giving the company a market capitalisation of R26bn. - Business Report