Responsible Retrenchment Practices

(Questions and Answers)

The COVID-19 pandemic has affected businesses in Singapore and throughout the world, and some businesses have had to retrench employees as a last resort. If retrenchment is inevitable, businesses must consider how to do this responsibly, sensitively and treat affected employees with empathy and dignity. Employers should take reference from the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEM) and relevant Advisories issued by the tripartite partners when implementing retrenchment exercise.     

To watch a sharing on TAMEM, with some case examples of how some organisations have handled retrenchment and learning points, click here.

Here are some frequently asked questions to address concerns about managing the retrenchment exercise fairly and responsibly.

Retrenchment Benefits (RB)

Is it compulsory to pay? If there’s a need to provide RB, can I impose a cap on the years of service or salary to compute the RB payment?

While retrenchment benefit is not mandated by law, MOM strongly encourages all unionised and non-unionised employers to adhere to the advisories, including to provide retrenchment benefit to help affected employees while they search for employment. 

The amount of retrenchment benefit depends on what is provided for in the employment contract, memoranda of understanding or collective agreement (for unionised companies). If there is no contractual provision, it is to be negotiated between employees (or their union) and the employers.

There is a wide range of support measures provided by the Government, including training grants and financial support, to help employers manage their manpower cost. The Jobs Support Scheme (JSS) provides wage support to employers, helping them retain local employees during this period of economic uncertainty. As such, even employers in severe financial difficulties would have some funds to provide retrenchment benefit to the affected employees, though the quantum may vary from employer to employer depending on their financial position.

Can an employer choose to pay Employment Assistance Payment (EAP) to employees who are being re-employed instead of retrenchment benefits?

When employees reach the retirement age of 62, employers are required to offer them re-employment until the age of 67. If you are retrenching these employees who are aged 62 or above, you can follow the EAP recommendations in the Tripartite Guidelines for Re-employment of Older Workers, unless retrenchment benefits are stated in the collective agreement or individual employment contract.

Are employees who have worked less than 2 years eligible for retrenchment benefits?

Employees who have worked for less than 2 years at a company are not eligible for retrenchment benefits. However, employers could grant an ex-gratia payment, i.e. out of goodwill to these employees, taking reference from the Advisory on retrenchment benefit payable to retrenched employees as a result of business difficulties due to COVID-19.

Employers should also refer to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment  for other options to manage excess manpower. If retrenchment is inevitable, employers should implement retrenchment responsibly and fairly in line with the advisory.

Do I need to show proof of my financial position (e.g. to employees or MOM) to determine if the retrenchment benefit provided is reasonable?

If there are disputes, you should be prepared to provide relevant information, as appropriate, to show that your retrenchment practices adhere to the tripartite advisories.

Can my company terminate my employment contract without paying any retrenchment benefit?

The Advisory provides guidance on when retrenchment benefit is payable during the COVID-19 situation.

If an employer terminates an employment contract with no plan to fill the vacancy soon, the employee is considered retrenched, and the Advisory will apply.

However, if your employer is undergoing a cost cutting exercise and the majority of the employees have agreed to fair wage reductions to preserve their jobs, but you disagree, then your employer can terminate your employment contract. This is not considered retrenchment. In this case, your employer must give due notice or pay in lieu of notice, and fulfil all other contractual obligations, before ending the employment relationship.

Termination vs Retrenchment

How do we differentiate between termination and retrenchment?

Retrenchment is the termination of employees because of redundancy or reorganisation of the employer’s profession, business, trade or work. An employee is presumed to have been retrenched if the employer cannot show a plan to fill the vacancy any time soon.  

Termination is the termination of an employment relationship which includes retrenchment but also on other grounds such as poor performance or misconduct. It can also be done with or without notice.

Managing Retrenchment and Redundancy

According to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, employers should communicate the intentions of retrenchment to their employees early and before the public notice of retrenchment is given. Apart from helping those who are affected by the retrenchment exercise, how can HR address the concerns and emotional needs of those who remain in the organisation?

After a retrenchment exercise, it is understandable that morale may be lower for those who remain. HR can address this by engaging this group further, be it through anonymous feedback channels or one-to-one counselling sessions where necessary. This will help to address any concerns with regard to employee’s career path or job/ personal expectations. 

It is also important to manage retrenchment sensitively as the manner and frequency to which the notice of retrenchment is communicated will not only affect the retrenchees but also the morale of those that remain in the organisation. 

In the event that a retrenchment is inevitable, how can I implement retrenchment exercises in a responsible and sensitive manner?

When carrying out a retrenchment exercise, the selection of employees for retrenchment should be conducted fairly, based on objective criteria such as the ability of the employee to contribute to the company’s future business needs. Employers should not discriminate against any particular group on grounds of age, race, gender, religion, marital status and family responsibility, or disability. For instance, older, re-employed as well as pregnant employees should not be unfairly targeted.

Employers should also give longer notice to the affected employees where possible and conduct the retrenchment exercise in adherence to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment. In carrying out the retrenchment, employers should continue to show respect to the affected employees and ensure that they are treated in a dignified manner, e.g. there is no need to have security escorting retrenched employees out of the workplace on the presumption that they will sabotage the business. 

Who should submit retrenchment notifications?

Employers with businesses registered in Singapore who employ at least 10 employees are required to notify MOM if 5 or more employees are retrenched within any 6-month period. The notification must be submitted within 5 working days after the employee is notified of his/her retrenchment.

Please go to http://www.mom.gov.sg/notify-retrenchment to submit the notification.

Why is this requirement only applicable to employers with at least 10 employees? Does this mean employers employing fewer than 10 employees will not receive any employment facilitation assistance?

To avoid placing too much administrative burden on small companies (i.e. those with fewer than 10 employees), we have exempted employers that employ fewer than 10 employees from submitting mandatory retrenchment notifications.

However, we encourage all employers to notify MOM of any retrenchment exercise. This will enable Workforce Singapore (WSG), the tripartite partners and other relevant agencies to help affected employees find alternative employment or identify relevant training to enhance employability.

If an employer informs that there will be a retrenchment exercise, but has not yet identified specific employees, does the employer need to notify MOM?

Employers are strongly encouraged to notify MOM early using the early alert form. Employers can provide an early indication of their planned retrenchment exercise and indicate their interest for Workforce Singapore (WSG), the tripartite partners and other relevant agencies to provide employment facilitation assistance for affected employees.

Subsequently, after the employer has identified which employees are to be retrenched, the employer will need to notify MOM within 5 working days after the 5th and subsequent employee has been notified of their retrenchment.

My employment contract with my employee states that I can provide 1-month notice to terminate employment at any time. Would I still need to notify MOM in this case?

Yes, your company must notify MOM if your employee is terminated on the ground of redundancy, or by reason of any reorganisation of the employer's profession, business, trade or work, and has met the mandatory retrenchment notification requirements.

When should I submit the notification?

The notification must be submitted within 5 working days after your employee is notified about their retrenchment.

For the first 4 employees who were notified of their retrenchment, the notification must be submitted within 5 working days after the 5th employee is notified. Thereafter, the notification must be submitted within 5 working days after each employee is notified of his or her retrenchment in any 6-month period.

What is the penalty for non-compliance?

Failure to comply with the requirements on the mandatory retrenchment notifications under the Employment Act will be a civil contravention, for which administrative penalties can be imposed.

Is letting go a term-contract employee regarded as a retrenchment if their contract expires?

If the contract is a fixed term contract, it would terminate automatically upon the expiry of the contract. Hence, it’s not regarded as a retrenchment. 

Can my employer retrench me even though they are getting the Jobs Support Scheme (JSS) Payouts?

Yes, despite their efforts and the JSS payouts, some employers could still have their operations and business prospects adversely affected and will need to make adjustments to their businesses to stay viable, including retrenchment. Retrenchment is the termination of employees due to redundancy, i.e. employer has no plans to fill the vacancy any time soon.

Redundancy is a valid reason for employment termination. If you are retrenched due to redundancy, your employer is required to fulfil all outstanding contractual obligations, e.g. annual leave encashment, notice pay, retrenchment benefit, etc.

Foreign workers

Does the Advisory also apply to foreign employees?

The Advisory applies to all retrenchments made during this pandemic crisis. 

The tripartite partners strongly encourage employers to take a long-term view of their manpower needs and implement the cost-saving measures outlined in the National Wages Council (NWC) Guidelines for 2020/2021 and the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (“TAMEM”) responsibly. Retrenchment should always be the last resort to manage manpower costs. When carrying out a retrenchment exercise, the selection of employees for retrenchment should be conducted fairly, based on objective criteria such as the ability of the employee to contribute to the company’s future business needs.

Should I cancel my worker’s work pass before securing the flight tickets for their repatriation? Do I need to bear the cost of repatriation?

If your workers are still holding live work passes, you must get flights for them before you can cancel their work passes. Employers have to bear the cost of repatriation, including buying an air ticket with check-in luggage allowance. You remain responsible for their levies and salaries until their work passes are cancelled, and are also responsible for their upkeep and maintenance as long as they are in Singapore.

Employers must follow these 4 steps to send your foreign workers home safely:

  • Ensure that your workers have no movement restrictions
  • Book their flights early
  • Register your interest to MOM if no flights are available
  • Check embassy websites for potential relief flights

For more information, visit https://www.mom.gov.sg/covid-19/sending-workers-home.

Can I exercise my contractual right to terminate the services of a foreign employee by paying salary in lieu of notice in accordance to the employment contract?

Employers may choose to contractually terminate an employment relationship with a local or foreign employee by giving notice or pay salary in lieu of notice according to the employment contract or the Employment Act, and fulfil all other contractual obligations.  

However, if the employer has no plans to fill the job vacancies any time soon, then the termination can be considered as a case of retrenchment and the employer should be prepared to explain the reasons for the termination if there are disputes raised by the employees. 

Employers should follow the guidelines on salary and leave arrangements and take reference from the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, where applicable. 

Does cancelling work passes mean workers are being retrenched?

No. Cancelling work passes of your foreign workers does not necessarily mean you are retrenching them.

Find out what constitutes a retrenchment.

Notice Period

In the event that a company is not able to give advance notice of retrenchment, can the employer provide salary in lieu of notice instead and is this act considered a fair practice?

Employees that are retrenched will need time to prepare for and look for alternative arrangements. Employers should communicate the intentions of retrenchment to their employees/unions early and before the public notice of retrenchment is given. Early notice or a longer notice period, to the extent practicable, will be helpful. Employers must ensure that they give due notice or pay in lieu of notice, and fulfil all contractual obligations which include retrenchment benefit if contractually provided for, before ending the employment relationship.

How is any “6-month period” defined?

Any 6-month period refers to any range of 6 months that can be identified. It does not mean half a calendar year. The day affected employees receive their notice of retrenchment is included in the 6-month period.

Example
An employer notifies 4 employees of their retrenchment on 1 April. As long as the employer notifies at least 1 employee of their retrenchment on or before 30 September, the employer is required to notify MOM of the retrenchment exercises involving all 5 affected employees, including the 4 employees notified on 1 April.

Cost-saving measures

What can employers do if they are unable to come to an agreement with their employees on adjustments to salary/working hours?

If the terms and conditions of an employment contract need to be changed, both employers and employees should negotiate and try to reach an acceptable agreement, taking into consideration business needs and the employee’s concerns. 

In the event that no agreement can be reached, the initial contractual terms and conditions must remain unchanged but either party can serve notice and end the employment relationship. 

Employers cannot make changes to the employment terms and conditions without the employee’s consent. To prevent misunderstandings or disputes, a written agreement with the new terms and conditions clearly stated, whether temporary or permanent, should be signed.

Employment Facilitation / Assistance

Roles of IHRP, WSG

What is the role of IHRP under this process of retrenching responsibly?

As reflected in our Body of Competencies, IHRP has always advocated that the separation and retrenchment process must be conducted in a professional manner. Employees need to be provided with timely and transparent communications, and treated with utmost respect and compassion during these difficult times. IHRP collaborates with our tripartite partners to offer guidance and a curated set of resources to help our IHRP certified professionals balance the mutual perspectives of their organisation and employees. All our IHRP certified professionals must commit to a Code of Professional Conduct, that upholds the core principles of ethical conduct, objectivity, empathy and compassion at the heart of all that they do. 

Can WSG provide an overview of the profile of those that they are helping them find a job? WSG targets both the white and blue-collar workers.

The profile of our jobseeker clients mirrors the profile of the workforce, comprising Professionals, Managers, Executives and Technicians (PMETs) and Rank and file, across all sectors.

Unfair Practices

How and when to file a claim if I have been wrongfully dismissed?

If you feel you have been wrongfully dismissed by your employer, you can file a wrongful dismissal claim with TADM within one month from the last day of your employment.

For dismissals without notice, your employer must substantiate that the dismissal was not wrongful.

For dismissals with notice or salary in lieu of notice, you must show proof that your dismissal was wrongful.

You are required to support your claims with the following information or documents:

  • Company name, mailing address and contact number.
  • Contact details, including email address.
  • Employment dates, occupation, and monthly salary.
  • Credit or debit card details or internet banking user ID and PIN for payment.
  • Employment contract or key employment terms
  • Salary payment records and CPF statements (where available)
  • Termination or resignation letter
  • Other documents relevant to your claim, e.g. time sheet, certification of pregnancy/estimated delivery date by a Singapore medical practitioner.

For managers and executives: If you were dismissed with notice or salary in lieu of notice, you can only file a wrongful dismissal claim if you have served your employer for at least 6 months.

How employee can know that the company is not avoiding retrenchment when company is terminating employees in small number to avoid reporting to MOM?

Retrenchment is the termination of employees because of redundancy or reorganisation of the employer’s profession, business, trade or work. An employee is presumed to have been retrenched if the employer cannot show a plan to fill the vacancy any time soon. If the employees think that they have been retrenched as the company does not have plans to fill the job roles, they may write in to MOM at mom_lrwd@mom.gov.sg  to have their case assessed.

Some retrenchment in MNCs result from global response to the current crisis. In such situation, there is not an option for the local branch to pre-empt and use the other levers shared (e.g. temporary salary reduction, unpaid leave) first and the expectation is that we proceed with the retrenchment. Would these be deemed as “irresponsible”?

The tripartite partners strongly encourage employers to take a long-term view of their manpower needs and consider alternatives to retrenchment. In the event that retrenchment is inevitable, companies should implement retrenchment exercises in a responsible and sensitive manner, taking reference from the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEM), bearing in mind the impact on the affected employees.

Unionised companies

If a unionised company is carrying out retrenchment, how long a notice period should it give the union and what’s the role of a union when it comes to retrenchment.

Where retrenchments are necessary, you should carry out the exercise responsibly in consultation with your union (if your organisation is unionised) or affected employees (if your organisation is not unionised). 

If a notice period is not defined in the collective agreement with the union, the company should contact the union as soon as the retrenchment date has been decided.

The notice period for employees should be spelt out in their employment contracts, or agreed between the employer and employee. If not, the notice period stipulated in the Employment Act applies.

If workers have to be retrenched, the unions will carry out discussions to ensure that the lay-offs are the absolute last resort for the company.

The unions will then proceed to negotiate for a “reasonable package” to be given to the workers who are being retrenched, taking guidance from the tripartite advisories and considering the financial position of the company before making any decisions.

These retrenchment benefits are usually pegged to what was agreed upon in the collective agreement.

Employers must ensure that the selection of the retrenched workers be based on objective criteria, and not discriminate against particular groups. In particular, the salary of the affected worker should not be the sole criterion. Employers should also consider the worker’s ability to contribute to the future needs of the business.

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Tripartite Guidelines

Refer to the Tripartite Guidelines on Fair Employment Practices to ensure that you abide by the guidelines on all the relevant practices.