Peru would lead layoffs in Latin America

41% of Human Resources specialists in Peru plans to reduce staff over the next six months, according to the latest study of Salaries and Hiring by Bumeran. In this way, we would be leading the projections of layoffs at a regional level, and we surpassed Ecuador (37%), Argentina (30%), Chile (29%) and Panama (25%).

How the year is going

So far this year, 74% of experts reported having carried out layoffswith cost reduction and insufficient performance as the main reasons.

“The main argument that is usually raised against a dismissal is that the company does not have the financial capacity to maintain the number of staff, since there are costs for the coming months that it cannot assume. In that case, it has the power to carry out a justified dismissal,” highlights Alejandra Dinegro, researcher and labor specialist.

In April of this year alone, 32,500 jobs were lost in the construction sector and 12,000 in the manufacturing sector, a trend that will be repeated in the next six months, with these sectors being the most affected, according to the INEI.

Another factor that would have motivated the layoffs would be political instability and economic situationwith 40% of specialists considering that the Government’s labour policies are bad or very bad and the truth is that, as Dinegro emphasises, this was not explored in depth in the message for the National Holidays.

No pay rise?

Although it was announced that the minimum wage will rise in the last quarter, the truth is that only 16% of specialists plan to increase their salaries in the remainder of the year, compared to 84% who would not do so.

However, both in order to proceed with the dismissals and not to increase wages, companies claim that they are in a bad financial situation and, in the absence of a regulation that puts pressure on employers, mass dismissals could occur, warns Dinegro. Unemployment would lead to greater poverty and greater food insecurity, he adds.

However, Alicia Jiménez, labor lawyer at Philippi Pietrocarrisoza Ferrero DU & Uria, argues that the increase in minimum wage should not justify layoffs.

“When faced with an increase in the minimum wage, companies must adjust their budgets and salary structures to comply with the regulations,” he points out.

This implies, explains Jiménez, a thorough review of costs and financial planning to avoid negative impacts on operations. “Firing staff cannot be the answer; it is preferable to explore measures such as process optimization, productivity improvement and restructuring benefits,” he stressed.

On the other hand, although the increase in the minimum wage does not justify the mass layoffsin a context in which the company faces serious economic difficulties, it could request authorization from the Ministry of Labor and Employment Promotion (MTPE) for the collective dismissal of workers, which implies an audit and validation by the corresponding authority, but these authorizations are granted with difficulty, explains Jiménez.

In the event of arbitrary dismissal, the employee may request reinstatement or file a lawsuit before the Judiciary, requesting compensation equivalent to 1.5 salaries per year of service.

No renewal of contract other option

• Jaime Cuzquén, a partner in EY’s Labor and Employment Department, emphasizes that when we talk about dismissals, we are not necessarily referring to justifying the decision based on a matter of capacity or conduct, but rather we are assuming that the employee’s contract will not be renewed.

• Generally, Cuzquén explains, when companies fire employees, they are not making a unilateral decision, but rather they are looking for the best option to end the employment relationship, and this would be done through non-renewal of the contract or also through a negotiation with the employee in which they offer some type of incentive.