The first half of 2024 has been marked by mass retrenchment exercises by major companies in the technology and finance sectors worldwide. The same has been observed in Singapore, although the layoffs have occurred in the wholesale trade and electronics manufacturing space as well.
There has also emerged a TikTok trend of Gen Z employees filming and posting videos of them reacting to being laid off over video call. Such videos can sometimes obtain millions of views. This viral TikTok trend demonstrates that an increasing number of younger employees are not afraid of speaking up against what they perceive to be unfair practices in the workplace – and seeking to hold their employers liable by harnessing the effect of social media. Companies who are shown to be unempathetic to employees may struggle to attract top talent in future, and at the very least, may face a period of intense public backlash and scrutiny.
Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchments
So how should employers conduct retrenchments? Unlike some jurisdictions, Singapore does not have any specific laws dealing with retrenchments that impose specific obligations on employers.
Instead, what employers are expected to do in the event of a retrenchment are set out in the ‘Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment’ (Advisory), an advisory issued by the tripartite partners in Singapore comprising Ministry of Manpower, the National Trades Union Congress, and the Singapore National Employers Federation. This tripartism approach is a unique feature of Singapore’s employment landscape. Many of Singapore’s labour policies, guidelines and advisories are formulated through consultation and collaboration amongst the tripartite partners.
Employers need to note that non-compliance with these tripartite advisories frequently trigger investigations and regulatory action by the Ministry of Manpower, who can impose administrative punishments such as curtailing an employer’s work pass privileges. In 2019, a well-known retailer laid off around 50 staff with immediate effect, without complying with the Advisory – the employer provided no prior warning of the retrenchment and employees were offered retrenchment benefits below those stated in the Advisory. The retailer’s mishandling of the retrenchment exercise garnered extensive media coverage and even drew public criticism from the Minister of Manpower who commented that the retailer ‘could have better handled’ the retrenchment. Consequently, many retrenched employees voiced their complaints and frustrations through the media which gave the incident extensive coverage. In addition, the Tripartite Alliance for Fair and Progressive Employment Practices also stepped into the matter to engage with the retailer who eventually increased the retrenchment benefits offered to the retrenched employees.
Under the Advisory, employers’ responsibilities in managing retrenchments can be categorised into three main areas:
Pre-retrenchment considerations
As a starting point, retrenchment should be considered only as a measure of last resort. Employers are required to explore job preservation and cost-saving measures before deciding on retrenchment. For example, employers should consider reskilling, training and redeployment opportunities for employees.
Where such options have been exhausted and retrenchment is inevitable, employers must use objective criteria when selecting employees for retrenchment. Objective criteria include the ability, experience, and skills of the employee to support the company’s sustainability, workforce transformation and/or future business needs. Discrimination on grounds such as age, race, gender, religion, marital status, family responsibilities, or disability is strictly prohibited. Additionally, employers are encouraged to maintain a strong Singaporean core and should not have a reduced proportion of local employees after the retrenchment.
Notification to employees, unions, and the government
Employers should notify affected employees of retrenchment in a sensitive and responsible manner. Before notifying individual employees of their retrenchment, employers should communicate early about the company’s efforts to manage business challenges, the circumstances necessitating the retrenchment exercise, the process involved in the retrenchment exercise, and the assistance that will be provided to affected employees.
For unionised companies, employers should notify and consult with the relevant unions early, before affected employees are notified. This collaborative approach ensures that employee interests are represented and considered throughout the process.
Companies with at least 10 employees have a statutory obligation under the Employment Act to notify the Ministry of Manpower on the retrenchment of any employee within five working days after the employee is informed of their retrenchment. Failure to comply constitutes a civil contravention under the Employment Act and administrative penalties may be imposed.
Supporting displaced employees
Employers are strongly encouraged to provide support for employees displaced by retrenchment, including retrenchment benefits, employment facilitation measures and outplacement assistance.
Retrenchment benefits, if stipulated in employment contracts or collective agreements with the unions, must be disbursed accordingly. Where retrenchment benefits are not contractually provided for, employers are still expected to offer retrenchment benefits to employees with two or more years of service. The prevailing norm is to pay a retrenchment benefit varying between two weeks to one month salary per year of service, depending on the financial position of the company and taking into consideration the industry norm. Employees with less than two years of service could be offered an ex gratia payment.
Re-employment support scheme
Looking forward, a new re-employment support scheme is set to be rolled out by the Singapore government by the end of 2024. The scheme aims to provide retrenched employees with temporary financial support, so that they can focus on upgrading their skills to secure a good long-term job. The Minister of Manpower has said that the government has reviewed best practices globally and is close to finalising the scheme parameters.
The importance of fair and responsible retrenchment practices in Singapore cannot be overlooked. Such practices not only ensure compliance with legal frameworks and advisories but also reflect a company’s commitment to ethical standards and social responsibility. By prioritising transparency, fairness, and employee welfare, employers can mitigate the adverse impacts of retrenchments on affected employees, safeguard their own reputation and credibility, and build trust and loyalty among remaining and future employees. In today’s competitive and rapidly evolving business landscape, employers that embrace these principles will be better poised to navigate economic challenges and emerge stronger than before.