Failure to handle retrenchment responsibly can jeopardise your company’s reputation.
Disclaimer : The case study is based on an actual case handled by TAFEP. The names and identifying details in this case have been changed to protect the privacy of individuals.
Retrenchment affects the livelihood of employees, hence handling it responsibly and sensitively can go a long way in helping them cope and move on to find alternative employment.
Employers should take note to:
- Be sensitive when communicating with affected employees
- Conduct the retrenchment exercise fairly
- Abide by the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment
- Ensure parity in the retrenchment packages offered
Where retrenchment is inevitable, employers should help their employees tide through the transition. Companies who wish to carry out retrenchment must submit a retrenchment notification to MOM in accordance to the mandatory requirements stated in the Employment Act.
Doing so will enable relevant government agencies to advise the companies on any labour relations issues that might arise, as well as provide timely employment assistance to their affected employees.
In May 2019, an established retail operator announced that it was bowing out of its current business at a prominent shopping district once the store lease expired at the end of the month.
With a few hundred people employed at this flagship retail store, the news made headlines and invited much speculation. The company conveyed through a media statement that they would ensure a smooth handover to the new operator, and would provide staff with the option of being deployed to other retail locations in Singapore.
In a drastic turn of events, it was announced in June that the company was laying off staff with immediate effect. There was no prior warning, or any communication in the form of circulars or memos indicating that the retrenchment would happen. 50 staff were just told to leave immediately.
TAFEP followed up with the company soon after the news broke and asked to meet with them along with representatives from MOM.The retrenchment was found to be poorly managed for the following reasons which were not in line with the Advisory:
- Employees were not notified in advance about their retrenchment
- Employees were made to acknowledge and accept their retrenchment packages within 3 days, failing which they would not receive any retrenchment benefits
- Employees were paid only 1 week per year of service of retrenchment benefits capped at 8 years
- Employees did not receive job placement facilitation or assistance
“We wish to apologise for how it was carried out. We admit we could have done better. With the new arrangements, we hope we have made it up to you. We also hope that we are able to rebuild the broken trust and image. – Chief Executive of the retail operator”
The company’s poor management of their retrenchment was not only widely covered in the media, but publicly chastised by the Minister of Manpower. The company continued to be plagued by bad press for a sustained period of time, with many of their retrenched employees directly taking to the media to rant and express their grievances. More importantly, the bad handling of their retrenched employees caused the company to suffer an immeasurable loss of corporate reputation.
“We felt a lot more relieved when they announced the improved retrenchment benefits package… We think that’s being a lot fairer to us. It gives us a bit more comfort during this tough period. – Affected ex-employee of the retail operator”
Following the engagement session with TAFEP, the company had a clearer idea of their obligations under the Tripartite Advisory. They raised the retrenchment benefits for its affected employees to be in line with what was recommended in the Tripartite Advisory, as a progressive measure.
Besides retrenchment benefits, they committed to improving their communications on the restructuring efforts through dedicated face-to-face sessions with affected employees.
They also signalled their willingness to work closely with the various government agencies to provide outplacement assistance to affected staff in their transition in the next few months. Such support included personalised one-on-one career coaching, job-matching, and counselling service for those who required them.