COMMENDABLE the efforts of the world's financial leaders may be, there is no denying that a global recession looms next year.

The infusion of liquidity in the market, government takeover of financial institutions and guarantee of bank deposits are expected to ease the adverse effects of the US-led financial meltdown.

But, from the looks of it, those measures may not be sufficient to prevent the world economy from suffering a deep contraction, although of lesser magnitude than that of the Great Depression.

The staffs of iconic American and European investment banks were, at the outset, hit hard by the crisis. Thousands of highly paid brokers, dealers, salesmen and backroom employees were thrown off their jobs.

Worse, their private pension and health plans, which they need most at this time, have been put on hold.

They cannot avail themselves of those lifeline programs until after their former employers have sorted things out with their creditors. And that could take a long time.

According to reports, the "saving grace" of the sudden unemployment surge is the availability of expert talent at lesser costs to smaller financial institutions in the US and developing countries.

When times are hard, the creme de la creme of the financing industry have to be realistic with their compensation demands.

Retrenchment
In the US, retrenchment of employees (or downsizing, to use a politically correct term) due to business losses is practically a breeze.

Unless the collective bargaining agreement with the union provides for a specific procedure or period, the company can serve the "pink slip" or dismissal letter on the termination date itself.

Even a verbal statement to that effect ("you're fired" a la Donald Trump's "The Apprentice") is permissible, especially if it involves executives or people who hold sensitive positions.

Regardless of the manner the order is given, the employee concerned can be asked to clear his desk immediately, usually with a security guard in tow to make sure he does not get company property, and escorted out of the premises.

Severance pay is rarely given for dismissal arising from business losses. Why? To do so would aggravate the company's financial problems and push it to bankruptcy or liquidation.

If the company is obliged under a CBA to give separation pay, the employee, before receipt of the money, has to sign a quitclaim which usually carries a commitment not to sue the company in the future for any other amounts related to his employment.

An employee who reneges on that promise could face a countersuit for "breach of contract not to sue," with a demand to return the severance pay, plus interest!

Business losses
In the Philippines, the rules on retrenchment due to business losses are similar to those of the US, but with a slight twist.

If the termination is done to prevent losses, or the company ceases operation for reasons other than serious business losses or financial reverses, the employee is entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

Thus, if a company closes shop due to serious business losses or financial reverses and, in the process, the employees lose their jobs, it is not required to give them separation pay.

The rationale behind the nonpayment is, it would be unreasonable to compel the company to pay the employees when it has no resources to draw on for that purpose.

Graphically, it would be like squeezing blood from stone.

But this does not mean employers have the carte blanche to dismiss their employees by the simple expedient of invoking serious business losses or financial reverses.

The losses or reverses should be really serious, or crippling enough to prevent the company from operating. Temporary or off-season losses will not suffice.

The burden of proof is on the company to prove the serious losses or reverses. If it fails to meet the criteria, it can be ordered to give separation pay to its employees.

Domestic effect
This early, prominent local businessmen anticipate that domestic companies whose businesses depend heavily on US or European markets may be forced to trim their workforce in 2009.

Unlike the Western countries where individualism (or every man for himself) is the norm of conduct, retrenchment is not easy to do in a country that has a strong sense of community or "pakikisama."

Considering our limited employment opportunities, a job loss can be an emotionally wrenching experience, especially if the affected person is the sole breadwinner of his family.

Nothing unites the employees or drives them to collective action more than the fear of some or all of them losing their jobs for reasons not attributable to their fault or action.

During the 1997 Asian financial crisis, the employees of some local companies affected by that problem toned down their wage demands, accepted adjustments in work schedules and adopted cost-cutting measures to avert closures or retrenchments. And the companies responded favorably.

Hopefully, the same spirit of cooperation will be alive next year.

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