In Zimbabwe’s public sector employment landscape, a complex legal relationship exists between three key instruments: the Public Entities Corporate Governance Act [Chapter 10:31], (PECOG), the Labour Act [Chapter 28:01], and individual employment contracts. While the PECOG Act seeks to strengthen accountability, performance standards, and corporate governance across public entities, the Labour Act remains the primary statute governing employment rights and obligations. Employment contracts, meanwhile, represent negotiated terms between parties but cannot override statutory protections.

Crucially, in cases of conflict, the Labour Act prevails. This is supported by settled principles of statutory interpretation and expressly provided for in the Labour Act itself, which states that any agreement, law, or policy inconsistent with its provisions is invalid to the extent of the inconsistency. As a result, while PECOG may introduce performance-based conditions or early termination clauses for executives, such provisions must still comply with the minimum protections afforded under the Labour Act. This legal hierarchy demands careful navigation to ensure that governance objectives do not undermine employees’ statutory rights, and that employment contracts are drafted with compliance at the forefront.

The PECOG Act: A Corporate Governance Tool
PECOG, enacted in 2018, was a response to widespread governance failures. As stated in its preamble, the primary purpose of the Act is to provide for the governance of public entities in compliance with Chapter 9 of the Constitution of Zimbabwe, by establishing a uniform mechanism for regulating the conditions of service of members of public entities and their senior employees. It further gives effect to section 9 of the Constitution of Zimbabwe, which dwells on the principles of competence, transparency, accountability, and efficiency in public administration.

PECOG empowers Ministers to exercise strategic oversight, including recommending appointments and dismissals of executive heads. In relation to a statutory body or a public entity, section 2(1) of PECOG states that a line Minister is the Minister or Vice-President responsible for the administration of the Act which governs the establishment of that particular statutory body or public entity, exercising control over the establishment on behalf of the State. The powers granted to the line Minister through PECOG are quite broad to the extent that this seemingly sweeping power finds resistance from two robust legal anchors: Labour Law and Contract Law.

Several key provisions directly affect executives and senior staff (such as Chief Executive Officers, Managing Directors, and heads of departments) in public entities. Firstly, section 17 of the Act, which governs the appointment of Chief Executive Officers (CEOs) in public entities, sets strict parameters to promote accountability and leadership renewal. It stipulates that no CEO may be appointed for a term exceeding five years, and this term is renewable only once, with a total maximum tenure of ten years. Even if performance is satisfactory, a CEO cannot be reappointed beyond ten years unless thePresident approves the reappointment. Further, in terms of section 17(1)(c), the board is required to review the CEO’s performance annually, and may terminate the appointment if performance standards are not met, as outlined in the CEO’s performance contract.

Section 20 of PECOG grants the Minister assigned to administer PECOG the legal authority, with the approval of the Minister of Finance and in consultation with the line Minister, to impose limits on the total remuneration, allowances, and benefits that may be paid to the chief executive officer and other senior staff of any public entity. These limits must be formalised through a notice published in the Government Gazette, giving them legal effect. Importantly, if the line Minister fails to respond to the Minister’s written request for consultation within thirty days, the law treats that silence as implied consent, allowing the Minister to proceed unilaterally with the publication of the remuneration limits.

In determining these limits, the Minister must be guided by a key financial principle: that the total compensation (including salaries, allowances, and benefits) paid to all employees, including senior staff, should not exceed thirty (30) percent of the entity’s revenues or operational budget from the previous financial year. This is intended to ensure fiscal discipline and sustainability, preventing public entities from allocating a disproportionate share of their resources to salaries at the expense of service delivery or operational efficiency. In effect, this provision legally restricts how much public entities can spend on their top executives, and provides a clear process through which such restrictions can be implemented.

Over the years, there have been related regulatory actions aimed at controlling remuneration within public entities. For instance, in July 2023, the Corporate Governance Unit (CGU) in the Office of the President and Cabinet issued a circular, circular 4/2023, dated 19 July 2023, permitting public entities to pay up to 40% of salaries and allowances in U.S. dollars, with the remaining 60% in Zimbabwean dollars. This measure was intended to cushion employees against inflation and exchange rate fluctuations. However, public entities had to ensure adherence to Section 20(2) of PECOG, which limits total remuneration and benefits to 30% of the entity’s revenue or operational budget, unless written approval is obtained from the Minister.

Of particular relevance to the contractual agreements of senior staff, section 20 (1)(3) further establishes that once a notice capping executive remuneration is officially published in the Government Gazette under subsection (1), it immediately takes effect. From that point forward, no individual covered by the notice, such as a CEO or senior staff member of a public entity, can receive any remuneration, allowances, or benefits exceeding the limits set out in the notice, regardless of what their employment contract or prior arrangements stipulate.

However, the provision provides a transitional safeguard for those already earning more than the newly imposed cap at the time the notice is published. These individuals are entitled to continue receiving their current (higher) remuneration for a grace period of three months in terms of section 20(3) of PECOG. After that period, their pay and benefits must be reduced to align with the limits specified in the Gazette notice. This provision ensures both the enforceability of public sector cost controls and a limited buffer for affected employees to adjust to the new regime or seek recourse if needed.

Further, section 21 of the PECOG imposes strict controls over terminal benefits such as gratuities paid to former executive members or senior staff of public entities. It mandates that no such payment may be made unless the proposed amount is first disclosed to both the line Minister and the Minister of Finance, and then approved or ratified by the public entity’s shareholders or stakeholders during the entity’s annual meeting as required under section 33(3). However, if the terminal benefit is being paid under a pre-approved scheme or arrangement that was already sanctioned by both ministers, additional approval is not needed for each individual payment. This ensures transparency and oversight over potentially large exit packages. If any terminal benefit is paid without following these approval steps, and the recipient does not voluntarily return the improperly paid amount, they become liable for a surcharge a financial penalty calculated in accordance with the Third Schedule of the Act. The aim is to prevent unauthorised or excessive payouts and reinforce financial discipline within public entities.

Section 11 of S.I 168 of 2018, that is the Public Entities Corporate Governance (General) Regulations, states that a public entity’s board can only dismiss its Chief Executive Officer (CEO) on the same legal grounds and through the same procedures used to dismiss board members, as outlined in Section 16 of the Public Entities Corporate Governance Act. However, the board must also obtain prior approval (endorsement) from the President before finalising the dismissal. Once the CEO is dismissed, the board must immediately publish a notice of the dismissal in the Government Gazette, making the decision a matter of public record. In that regard, when section 11 of the General Regulations is read together with section 16 of PECOG, a CEO of a public entity can only be dismissed for specific, justifiable reasons, such as misconduct, disqualification, breach of contract, or failure to meet strategic objectives. The dismissal must follow the same procedures used for removing board members, including notifying the line Minister in advance.

Section 23 of the Public Entities Corporate Governance Act mandates that every CEO and senior staff member of a public entity must enter into a written performance contract with the board upon appointment, and cannot assume office until this is done. The contract must include key performance indicators (KPIs), provisions for regular performance evaluations (at least every six months for CEOs), and clearly defined penalties for underperformance, which include dismissal, suspension, or loss of benefits. It ensures accountability and performance-driven management. Additionally, the board must promptly submit copies of these contracts to the relevant line Ministry and, in the case of the CEO, also to the Corporate Governance Unit.

The Labour Act: Supreme Employment Framework
Section 65 of the Constitution of Zimbabwe guarantees the right to fair labour practices and standards. Section 2 of the Constitution reaffirms the supremacy of the Constitution, in terms that are significantly wider and more inclusive than those embodied in its precursor in the former Constitution, as follows:

“(1) This Constitution is the supreme law of Zimbabwe and any law, practice, custom or conduct inconsistent with it is invalid to the extent of the inconsistency.

(2) The obligations imposed by this Constitution are binding on every person, natural or juristic, including the State and all executive, legislative and judicial institutions and agencies of government at every level, and must be fulfilled by them.”

In that regard, it is important to note that the Labour Act [Chapter 28:01] is the supreme employment framework. Section 2A (3) states that this Act prevails over any other enactments which are inconsistent with it. Crucially, this supremacy binds not only individuals but all arms and levels of government, including public entities and ministries.

Section 3 of the Act states that it applies to all employers and employees in Zimbabwe, except where employment conditions are governed by the Constitution. It does not apply to members of the Public Service (regulated by the Public Service Act), members of Zimbabwe’s disciplined forces, foreign security personnel in Zimbabwe under government agreements, or other State employees exempted by the President through a statutory instrument. Therefore, since executives and senior staff members of public entities are not excluded under these categories, the Labour Act applies to them.

Zimbabwean courts have affirmed the supremacy of the Labour Act in regulating employment relationships, an affirmation which as aforementioned, is also grounded in the Constitution[1]. Therefore, no administrative or executive action, regardless of its source, may override the procedural and substantive guarantees provided by the Labour Act.

Section 12B of the Labour Act, which provides a statutory framework for fair employment practices. It states that unfair dismissal occurs when an employee is terminated without just cause or due process. According to the Labour Act, it is unfair if the employer fails to follow a registered employment code or, where none exists, the model code set by law. It is also deemed unfair if the employee resigns because the employer made the work environment unbearable, or if a fixed-term contract ends and the employee reasonably expected renewal but someone else is hired instead. In deciding fairness, labour authorities must consider not just the misconduct but also mitigating factors like the employee’s service length, disciplinary history, role, and personal circumstances. The Labour Act further places the burden on employers to justify any termination of employment, thereby safeguarding employees from arbitrary or procedurally flawed dismissals.

In terms of section 13 of the Labour Act, upon termination of employment, whether by dismissal, resignation, incapacity, or death, an employee or their estate is legally entitled to receive all wages and benefits due up to that point. This includes pay for any outstanding leave, notice period, medical aid, social security, and pension. It will constitute an unfair labour practice if the employer fails to pay these terminal benefits. Importantly, these benefits are distinct from retrenchment packages and should not be treated as part of it.

Employment Contracts: Their Role and Limitations
Barkhuizen v Napier[2], the South African Constitutional Court stressed that freedom of contract is a foundational value, but its enforcement must align with public policy and fairness. Further, contract law is grounded in the principle of pacta sunt servanda – agreements must be kept, a common law doctrine which recognises the sanctity of contract.

Written employment contracts are essential in public entities as they clearly outline the expectations, roles, responsibilities, and conditions of employment for executives and senior staff. As aforementioned, under Section 23 of PECOG, no executive or senior staff member may assume office without first signing a performance contract that sets out KPIs, penalties for non-performance (including dismissal), and regular evaluation requirements. This contractual obligation ensures alignment with institutional goals and promotes accountability.

However, relying solely on PECOG when drafting employment contracts presents legal risks. For example, while PECOG, via S.I. 168 of 2018, allows for dismissal based on performance contract breaches, such action must still comply with the Labour Act, particularly Section 12B, which guarantees the right not to be unfairly dismissed and outlines proper dismissal procedures. If a contract is terminated without observing due process under the Labour Act, such as the use of a valid code of conduct or fair hearing, the dismissal will be deemed unlawful, even if it follows PECOG’s provisions. Therefore, contracts must be carefully drafted to comply with both PECOG and the Labour Act, which is the supreme employment framework, ensuring that performance expectations and disciplinary procedures are legally enforceable and procedurally fair.

Points of Legal Tension/Conflict
While PECOG was enacted to promote transparency, accountability, and performance in the management of public entities, its provisions, particularly those relating to the appointment, dismissal, and regulation of senior executives’ contracts, often intersect with, and at times conflict with, the established protections afforded under the Labour Act. The Labour Act remains the principal legislation governing employment relations in Zimbabwe. It is inevitable that this dual regulatory framework gives rise to key legal tensions, especially when public entities attempt to enforce executive contracts or disciplinary measures solely on the basis of PECOG. The following points explore these areas of conflict and the implications for employment law compliance within public entities.

Early Termination under PECOG vs. Protection from Unfair Dismissal: PECOG permits boards to terminate executive contracts for non-performance, subject to Presidential endorsement (S.I. 168/2018). However, the Labour Act provides a broader framework protecting all employees, including executives, from unfair dismissal. Section 12B requires due process, such as the application of a valid code of conduct or the model code. Termination based solely on performance without following Labour Act procedures risks being overturned as unlawful.

Performance-Based Contracts and Justifiable Termination: Section 23 of PECOG mandates written performance contracts for executives, including clear KPIs and penalties like dismissal. However, dismissal based on performance alone does not override Labour Act protections. The Labour Court will scrutinise whether procedural fairness and substantive justification were followed per Section 12B (4) of the Labour Act, especially regarding factors like length of service, mitigating circumstances, and proportionality of the penalty.

Fixed-Term Contracts and Expectation of Renewal: The Labour Act deems it unfair dismissal if a fixed-term employee has a legitimate expectation of renewal and is replaced by another person (s.12B(3)(b)). PECOG does not specifically address this issue, yet many executives are on fixed-term performance contracts. If termination occurs without notice and in circumstances that suggest the employee expected renewal, legal conflict arises, especially if the Labour Court finds evidence of procedural unfairness or discrimination. However, it is important to note that section 17(1) of PECOG clearly sets a contractual term limit for CEOs at a maximum of five years, renewable only once. Accordingly, while the Labour Act’s protections may apply to issues surrounding renewal expectations, they must be interpreted in light of PECOG’s express statutory limit on executive contract duration. Where a CEO reaches the end of the second term, no legal expectation of renewal arises.

Terminal Benefits vs. PECOG Public Notices: While PECOG, for example through ministerial notices, may regulate benefits upon termination, Section 13 of the Labour Act governs terminal benefits, including payment for notice, leave days and pensions. Discrepancies between PECOG gazetted notices and the Labour Act can create disputes, especially if PECOG provisions fall short of Labour Act standards.

Dispute Resolution: Labour Officers/Labour Court and Ministerial Involvement: PECOG involves ministerial oversight and even presidential endorsement in dismissals (S.I. 168/2018), which may complicate dispute resolution. However, the Labour Act remains the primary dispute resolution framework through designated labour officers and the Labour Court. If a dispute implicates a Minister’s decision or approval, for example approval of remuneration limits or dismissal, the dispute resolution mechanisms provided for by the Labour Act will still apply.

While the Labour Act does not explicitly mention citing Ministers in employment disputes, its dispute resolution framework allows the joinder of relevant parties who have decision-making authority over the dispute. For example, if a contract is terminated or varied based on a ministerial notice, and the affected executive challenges the legality or fairness of that action before the Labour Court, the Minister’s decision forms a central part of the dispute. In such circumstances, Rule 33 of the Labour Court Rules, 2017, allows the court to join the line Minister, as an interested party to the proceedings. This ensures that the Minister, as the issuer of the directive or approval, can provide context, justify the decision, and be bound by the outcome.

Resolving Conflicts: Legal Hierarchy and Interpretation
When interpreting statutes like the Labour Act and PECOG, courts apply principles of statutory interpretation to resolve any apparent conflict. Key principles include harmonious interpretation, which seeks to read both statutes together in a way that gives effect to each. However, in employment-related matters, the Labour Act is the overriding framework. PECOG provisions must be interpreted and should operate within the confines of the Labour Act. A dismissal endorsed under PECOG, or an act of unilateral variation of the contract by the line Minister, without following due process under the Labour Act may still be declared unfair or unlawful by the Labour Court.

Best Practices for Public Entities
To operate lawfully and effectively, public entities must align employment contracts with both PECOG and the Labour Act. While PECOG governs governance structures, performance obligations, and oversight, the Labour Act provides the fundamental legal framework for all employment relationships, including protection against unfair dismissal, rights to due process, and dispute resolution. Contracts must therefore reflect PECOG’s requirements, such as mandatory five-year performance-based contracts without violating labour rights guaranteed under the Labour Act.

A critical best practice is to subject all executive and senior staff contracts to independent legal review before signing. This ensures that clauses on remuneration, performance benchmarks, disciplinary action, and termination are both compliant with statutory mandates and enforceable in a labour law context. Contracts should avoid vague or overly punitive terms that may be struck down as contrary to public policy or labour standards.

In particular, termination and performance clauses must be carefully structured to meet the dual thresholds of PECOG’s accountability objectives and the Labour Act’s fairness requirements. For example, dismissal based on poor performance must follow the evaluation mechanisms set out in PECOG and be procedurally fair under the Labour Act, for example allowing a right to be heard, providing notice, and offering a chance to improve.

Finally, public entities must uphold fair labour practices, even when enforcing governance reforms. Performance standards and control measures should not be used to sidestep rights to job security or due process. A balanced approach that respects both efficiency and equity is essential to minimise legal risk and foster ethical public sector leadership.

[1] See Sakarombe N.O & ANor v Montana Carswell Meats (Private) Limited SC44/20 at page 20.

[2] 2007 (5) SA 323 (CC).