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Responsible Retrenchment Practices in Singapore

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Responsible Retrenchment Practices in Singapore

by Ivan
May 27, 2021

As a result of the current economic crisis that the world faces, organizational change is an unfortunate reality for many businesses. This has led to changes in the market as businesses are adopting shifts in business strategies and the need to optimize processes is already leading to job losses and retrenchments. The Singapore economy is also open and highly exposed to changes in external demand and supply in the global economy and it is not hidden that Singapore too has faced various retrenchments in the past year.


We have been talking about responsible retrenchment practices, let’s dive into what and how retrenchment is governed in Singapore.

1. Retrenchment in Singapore – principles, procedures and guidelines.

In the Singaporean context-The Tripartite Advisory(comprising the Ministry of Manpower (MOM), National Trades Union Congress (NTUC) and Singapore National Employers Federation (SNEF)) on Managing Excess Manpower and Responsible Retrenchment aims to assist and guide employers in managing their excess manpower, preserving jobs and conducting retrenchment exercises responsibly.

The Tripartite Partners provided an update to their advisory on managing excess manpower and responsible retrenchment.

1.1 Criteria for selection of employees to be retrenched.

Employers must ensure objectivity in the selection of employees for retrenchment. Selection should be based on objective criteria such as:

  • their ability,
  • experience, 
  • skills of the worker to support the company’s sustainability,
  • workforce transformation and/or future business needs.
  • maintaining a Strong Singaporean Core- this means Retrenchments should generally not result in a reduced proportion of local employees. This can be achieved by retaining proportionately more locals during a retrenchment exercise.

1.2 Guidelines to the Procedure of Retrenchment.

MOM has laid down various responsible retrenchment guidelines in case the retrenchments are inevitable which are: 

1. Clear Communication and Notification-Employers must communicate clearly the following:

  • The business circumstances faced by the company resulting in the need for a retrenchment,
  • The company’s efforts to sustain business challenges,
  • Outlining how the retrenchment exercise are going to be administered,
  • Explaining on the factors that will be considered, 
  • Specifying the help being offered to those affected.

 

2. Provide an extended notice period (beyond contractual or statutory requirements) where possible.

Duration of Employment on the date

when notice is given

              Length of Notice

Less than 26 weeks

1 day

26 weeks to less than 2 years

1 week

2 years to less than 5 years

2 weeks

5 years and above

4 weeks

 

3. Be sensitive about emotional needs of the retrenched employees and provide them both emotional and psychological assistance during the process.

 

1.3 Reporting Retrenchment to the authorities.

Under the Employment Act, it is compulsory for Singapore-registered employers with at least 10 employees, who have retrenched 5 or more employees within any 6-month period to notify MOM about the retrenchment carried out. This must be done within 5 working days after affected employees are notified of their retrenchments.

Failure to fulfil with this requirement on the mandatory retrenchment notifications will be a civil breach, for which administrative penalties can be imposed.

1.4 Retrenchment Benefits.

In Singapore though it is not a mandate by law to pay retrenchment benefits. It would entirely depend upon the financial situation of the company though it is advised to pay a reasonable sum to retrenched employees that enables them to find a new employment.

The usual norm is to pay a retrenchment benefit of between 2 weeks to 1-month salary per year of service, depending on the company’s financial position and the industry.

In unionised companies where the amount of retrenchment benefit is stated in the collective agreement, the norm is 1 month’s salary for every year of service.

1.5 Helping Retrenched Employees find new job opportunities.

Another responsible retrenchment practice followed and advised in Singapore is to assist retrenched employees finding new opportunities through job fairs etc. Companies can also work with unions, the Singapore National Employers Federation (SNEF), agencies such as Workforce Singapore (WSG), NTUC’s UPME Centre and the Employment and Employability Institute (e2i) to help affected employees find alternative employment.

 

2. Alternatives to Retrenchment.

It has been reported that retrenchments in Singapore have doubled to 8,130 in the three months to end-June in 2020.


The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment has laid down certain alternatives to retrenchment that can help business be viable during tough times, which are:

  •  Redeployment:

Most often in an organization there are employees who have different or multiple skill sets and are capable of doing different roles. Identifying those and redeploying them to different areas instead of retrenching would be a good alternative. This not only would have benefit over retrenchment but will also lead to:

  1. Fewer job loss.
  2. Increased motivation
  3. Retention of good talent
  4. Reduced cost of onboarding new staff.

 

  •   Training and skills upgrading of employees:

Training is a good alternative that provides reskilling or upskilling benefits to the employees moved to new positions. Also the employees trained feel valued. Training employees would help organizations fill the skill gap and these trained employees would turn into a future ready workforce providing longer competitive advantage.

MOM also provides such assistance in the areas of training such as:

  1. Employers could also receive absentee payroll subsidies for employees undergoing training.
  2. Employers can tap on training support schemes under the SkillsFuture movement, redeployment programmes under the Adapt & Grow initiative and other government grants.

 

  •  Introducing shorter work weeks:

Organizations can introduce shorter work weeks but MOM has laid down mandatory guidelines in this aspect. This reduced duration:

  1. Should not exceed 3 days in a week.
  2. A reduction of 3 days should only be implemented if the company’s performance is severely affected.
  3. Should not last more than 3 months.


  • Temporary layoffs:
  1. This is slightly a sharper course that employer can follow but it also has certain obligations laid down:
  2. As an employer you must pay 50% of the gross salary of the employees on the days they are temporarily laid off.
  3. Employees can be asked to take 50% of their earned annual leaves.
  4. Temporary layoff should not exceed more than 1month for one employee in the period under review.
  5. In case the salaries are impacted, notify MOM. 

 

  •  Direct adjustments in annual wages and variable components:

This is another cost saving measure that permits employers to make direct adjustments to wages to further reduce costs. It should though be practiced in extreme severe business conditions that are uncertain and likely to remain for long term. Adjustments can be made in annual salary or monthly variable incomes of the employees.

Retrenchment in any situation should be the last resort and hence should be carried out responsibly. As an employer one should always consider how fewer jobs are lost amidst difficult situations.

 

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