Can a company legally lay off employees due to financial difficulties?

Yes, companies can generally reduce their workforce for genuine business reasons, including financial difficulty, but labour law requires specific conditions to be followed for such retrenchment — including adequate notice (or pay in lieu), retrenchment compensation calculated based on length of service, and in some cases (depending on the size of the establishment and applicable law), prior permission from the appropriate government before large-scale layoffs.

Employees selected for layoff are also generally supposed to be chosen following the "last in, first out" principle for their specific category of work, unless there's a valid, documented reason to deviate from this — an employer that doesn't follow proper retrenchment procedure can have the retrenchment challenged as illegal.

If you or a colleague is facing a layoff, it's worth checking whether the employer followed the correct notice, compensation, and selection procedure required for retrenchment under applicable law, and reviewing your specific employment contract for any additional protections. A labour lawyer can assess whether your particular layoff was conducted lawfully and what remedies might be available if it wasn't.