Impact Of Retrenchment On Retirement Benefits

Abstract

Retrenchment has become an every day issue in the current working environment. This comes in the form of restructuring within a working environment or in the form of structural adjustment programs though every company/working institution has it's own policy regarding the treatment of retrenchment - a subject most dreaded by all persons who are under employment of an employer.

This paper studies the impact of this retrenchment on retirement benefits. After an analysis of the data got, the paper further attempts to construct a Follow up life table in order to come up with an actuarial model that can be used in retrenchment programs, the types of retirement benefit schemes largely affected by retrenchment programs, the set of employees usually targeted during a retrenchment exercise. The paper finds that there is an almost direct relationship between retrenchment and retirement benefits of an individual at the time of retrenchment. The paper argues that the approach used during retrenchment undermines the early meaning of a retirement benefit promised by the employer to the employee at the time of retirement .. Further the paper argues that irrespective of how large or small a retirement scheme-is, the effects of retrenchment cannot be underestimated. ..

This study was carried out in one of the local private company in Kenya and confined itself on one form of exit from employment i.e. retrenchment. A brief look at the retirement benefits provision in Kenya was done. A follow up life table was constructed based on the data available, so as to establish- time at which individuals are expected to be retrenched at any time in the future. The variable of interest was length of time between employment and leaving company, and here the event was retrenchment.