Know Your Employment Obligations - Responsible Retrenchment

TAFEP’s advice:  

Some employers would look to retrenchment to rapidly cut costs when the business is not performing well.
During such situations, these employers would typically be focused on the continued survival of the business, and prioritise managing issues directly related to profitability.

However, it is also important for employers to consider alternative ways^ of managing costs and manpower where possible, such as upskilling employees, re-designing jobs, re-deploying employees to other jobs, instituting part-time work, flexible wage system, and shorter work-week.

Specific Guidance in the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment 

In the event that retrenchment is inevitable, employers are expected to do so in a responsible and sensitive manner, ensuring that employees are treated with empathy and dignity, and follow the recommendations listed in the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, including: 

• Notifying Ministry of Manpower (MOM) and unions of retrenchment;
• Selecting employees for retrenchment fairly;
• Communicating retrenchment to employees early; 
• Offering retrenchment benefits at the prevailing norm; and
• Providing employment facilitation to affect employees. 

Businesses facing structural changes and need help in managing their excess manpower are advised to submit an early alert to MOM to get information on government assistance schemes and advice in applying the Tripartite Advisory at the workplace.

Communication is key

Responsible employers will always consider the feelings of their employees and demonstrate care and respect in all of their decisions and interactions. One way they do this is by telling them about the upcoming retrenchment exercise before the public notice of retrenchment is given (where practicable), and provide them with key information such as: 

• The business situation faced by the company and measures taken by the company to reduce business costs resulting in the need for a retrenchment;
• How the retrenchment exercise will be carried out;
• The factors* that will be used to select the affected employees for retrenchment; and 
• The types of assistance available for those affected (e.g. engaging career coaches to provide advice to aid their job search, providing outplacement assistance programmes for the affected workers and linking them with employment/placement agencies, and providing counselling support to help them cope with the stress of job loss). 

Timely and open communication not only establishes and increases trust among the employees who remain in service, but also helps those affected by retrenchment to make alternative arrangements such as to look for courses to upskill or reskill themselves, or to look for other career opportunities. 

Employers can consider a longer retrenchment notice period (or to pay in-lieu of such notice) to help the affected employees through the transition period, and importantly, to ensure that all salaries and retrenchment benefits are paid by the last day of work. 

A good practice to ensure the retrenchment is conducted sensitively is to inform affected employees in person,
with the HR and the employee’s manager present, instead of during a mass meeting, telephone call or through email. Supporting documents and resources such as employer testimonials, referral letters, service records and past training certificates should be provided to affected employees to facilitate their job search. 

In addition, employers should take note and also be sensitive to employees remaining in the organisation who can be affected by the exercise. It is important to proactively engage and support them by ensuring that their concerns and emotional needs are addressed to mitigate the negative impact on their morale. 

While employees and former employees may not remember the details about why the company had to retrench, they would remember how they were treated during the retrenchment exercise. For this reason, it is important to ensure that the whole process – from start to finish – is done fairly and employees are always treated with respect and dignity. 

For more information on retrenchment, please visit the following websites: 

• Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment 
• Tripartite Guidelines on Mandatory Retrenchment Notifications

Additional resources

EAS@TAFEP - EAS@TAFEP consultants will provide scenario-based advice to employers on the Employment Act and relevant parts of the Child Development Co-Savings Act, Employment of Foreign Manpower Act, and Retirement and Re-employment Act, which impact employment terms and conditions.

EAS@TAFEP consultants are not providing legal advice and will not discuss points of law. We will only provide practical guidance on the application of the Employment Act and other related labour laws to the specific scenarios that are raised by employers and share good employment practices that are adopted by industry peers and employers in Singapore.

For more information on EAS@TAFEP, please visit https://www.tafep.sg/eastafep

_{^ Other cost-saving measures to help companies manage their excess manpower can be found in Annex A of the Tripartite Advisory of Managing Excess Manpower and Responsible Retrenchment} 

_{* Employers should not discriminate against any particular group on grounds of age, race, gender, religion, marital status and family responsibility, or disability. Employers are reminded to abide by the Tripartite Guidelines on Fair Employment Practices}