In our recent webinar, we explored the principal regulatory and commercial issues to consider when contemplating multi-jurisdiction restructuring impacting some of the key markets in the Middle East and Africa.
Although there are common themes across the region there are also some significant local differences to take into account
You can find more details about the webinar and a link to the discussion recording below.
We have set out some of the key takeaways below – please do reach out to your usual Baker McKenzie contact or any of our speakers to discuss any of the issues discussed in more detail.
Our key takeaways
It's a mixed picture
The global economic slowdown has created a great deal of business disruption and uncertainty which has also been felt across the Middle East and Africa. Inflation has put significant pressure on wages and employers are grappling with political uncertainty in some markets while managing rising business costs more generally.
Even in those markets where the economic outlook is more positive, cost cutting measures are still being implemented locally as a result of global programs by multi-national organisations looking to 'right size' their business.
Attracting and retaining key talent creates tensions with cost cutting
Despite the economic turmoil, in most jurisdictions the market for key talent is still very competitive and a skills shortage persists. Employers are having to balance recruitment and retention of this talent with the need to make costs savings. This can be a very difficult balance to get right and there are various risks - not only in legal terms, but also around internal messaging and being able to appeal externally to sought after candidates.
Cost cutting measures that stop short of redundancies are not risk-free
While potentially less contentious than redundancies, recruitment freezes, changing terms and conditions and ending the use of contingent workers still carry legal and reputational risks; these are greater in some jurisdictions over others. In some markets, we are seeing a greater appetite to reskill employees so that they can adapt to the changing needs of the business.
Voluntary leaver schemes are a useful tool but beware local factors impacting negotiations
Voluntary leaver schemes can be very helpful in achieving the desired headcount reductions and are used a great deal in practice in the markets we discussed. If managed carefully, going down this route can enable the employer to expedite the termination date and have a degree of finality on legal costs and risk.
However there are local factors that should be taken into account and managed as part of any voluntary scheme because of their potential to lead to prolonged and challenging negotiations - even deadlock in some cases. High unemployment rates in some markets and difficulties in finding alternative employment can lead to unrealistic employee demands for significantly enhanced severance payments. In some Middle East markets the link between employment and immigration status means termination of employment has much wider repercussions for an employee and their family; this can impact willingness to agree exit terms.
Local regulatory requirements on redundancies vary significantly
Employees in the same situation can have significantly different rights depending on the jurisdiction in which they are based.
Implementing redundancies can take from a few weeks in some markets to several months in others depending, for example, on the required consultation procedure. Termination costs can also vary considerably. Additionally collective bargaining agreements may prescribe the processes that need to be followed; they may also include enhanced rights to severance pay.
In some markets approval of relevant labour authorities will be required for any valid termination to be possible. This can add a significant layer of complexity to any collective dismissal process and in some cases could delay or even halt the relevant restructuring plan.
A blanket approach to restructuring cross-jurisdiction could limit options
A tailored jurisdiction-specific approach taking account of local market factors may appear to be more complex to manage at the outset, but could lead to a smoother process overall and enable organisations to take advantage of approaches available in some jurisdictions that may not be possible in others.
- Investing time in planning and identifying project risks upfront will save time and money - planning is key!
- At the outset, determine whether a harmonised cross-jurisdiction or market-specific approach is appropriate for the business.
- Assess likely costs including severance packages for each impacted jurisdiction.
- Build a strong economic rationale justifying any contemplated economic dismissals.
- Involve local internal and external advisers early on in the process to gather local insights – including on factors that might impact the success of voluntary leaver schemes.
- Prepare a well-coordinated cross-border communication strategy across jurisdictions that includes handling of press coverage and market/investor perceptions, as well as communication with the workforce, works councils and other representatives. We recommend use of a communication 'control center'.
- Build out a strict time schedule for negotiations with employees/representatives; manage this tightly.
- Build in contingency plans, for example, to deal with possible leaks to the media or the workforce prior to formal announcement and be ready to jump in to deal with these consistently.