What is the difference between termination and retrenchment?

Last updated 14 Aug 2023

Either you or your employer can terminate a contract of service by following the terms and conditions for termination as stated in your contract of service. The party who decides to terminate without notice will have to pay compensation in lieu of notice.

Under the Tripartite Guidelines on Mandatory Retrenchment Notifications, retrenchment is the termination of employees due to redundancy or reorganisation of the employer’s profession, business, trade, or work. This includes situations where companies undergo liquidation, receivership, or judicial management. Read more on responsible retrenchment

As with any termination of contract, including a retrenchment exercise, notice must be served or paid in-lieu. The notice period will depend on the employment terms in your employment contract. In absence of such terms, the notice period stated in the Employment Act applies.

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