Retrenchment guidelines in Singapore (notice, benefits & more)

There are limited legal obligations which employers need to stick to, when firing employees in Singapore.

However, the Ministry of Manpower (MOM) and its partners provide guidelines for employers in Singapore, to manage and implement retrenchment. Companies are not legally bound to adhere to these guidelines but they serve as a good benchmark for employers and employees as well.

To start with, the current guidelines give employers various cost-diminishing ways to manage employees while trying to avoid retrenchment.  The following are some of the suggestions:

  • Rotating employees to other areas of the enterprise.
  • Adjusting work schedules in response to lower demand and using the lulls in business to further train workers.
  • Shortening the work week.
  • Implementing temporary layoffs or flexible schedules.
  • Using an adaptable wage system.

Businesses can also employ government assistance to up-skill employees.

However, if retrenchment is necessary, then employers should deliver appropriate aid to all affected employees. They should also notify MOM or the TAFEP (Tripartite Alliance for Fair and Progressive Employment Practices) of their plans as soon as possible because it will allow TAFEP and other relevant agencies to work with businesses and assist the retrenched workers to look for alternate employment.

Another guideline includes proper communication with employees about any retrenchment necessities.  The Employment Act lists the minimum notice an employee should get based on how long he or she has worked at the company. Anyone working at a company less than 26 weeks gets one day, between 26 weeks to less than two years gets one week, two years to less than five years gets two weeks, and five years and above get four weeks.

The guidelines also comment that employers should offer retrenchment benefits/compensation to anyone being let go. The type of benefits will depend on the terms of any agreements in place; however, if there is a lack of such documentation, then both parties will have to discuss the benefits.

In respects to compensation, the guidelines mention that employees will be qualified for benefits if they have been working at a particular company for at least two years.  MOM suggests that employers offer two weeks to one month’s pay, for every year of employment. Even if employees are not officially eligible for benefits, companies can make payments if they deem it necessary.

When calculating unspent annual leave for staff that have been retrenched, the amount is usually reliant on the employment agreement.  For matters such as transport or housing, the calculations are a bit more difficult.  Overall, whether and how staff are compensated depends on their employment contract.

MOM also cautions employers that they will look into any discriminatory allegations regarding retrenchment, such as unethically targeting Singaporeans or replacing them with foreigners. If the accusations prove to be legit, offices may have work privileges suspended.

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