How to retrench employees responsibly and fairly

Retrenchment is the termination of permanent employees. This is usually because of redundancy or a reorganisation of the company or business. When we speak of the term retrenchment exercise, we usually refer to it as the termination of a noticeable number of employees. However, the things that are mentioned in this article should similarly apply even if a small number of employees are retrenched. It should even apply when one employee is laid off.

How to select employees for retrenchment?

Retrenchment should not be based on discriminatory factors. The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEMRR) provides for a few several key factors during a retrenchment process. Do note that these factors are not exhaustive.

  • The future business contributions of an employee;
  • Avoidance of discrimination based on age, race, gender, religion, marital status, family responsibilities (e.g., pregnancy), or disability;
  • Ensuring no reduction in employee entitlements or benefits (e.g., maternity leave);
  • Preventing penalization for the exercise of employee rights (e.g., filing a wage-related complaint).

All companies should adhere to these factors. This will minimise legal challenges from employees who may allege unfair dismissal.

Prior to Implementing a Redundancy Program

Notification to TAFEP and/or Relevant Union: Informing the Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) about the redundancy exercise is optional but recommended for guidance on adherence to TAMEMRR. For unionised entities, it is advisable to consult the union, typically a month prior to notifying employees, as per most collective agreements.

Employee Communication: Employers are advised to proactively communicate the impending redundancies and their rationale to employees before public disclosure, detailing the economic necessity behind the move, the implementation plan, the criteria for selection, and the support to be offered to those affected.

Notice Period: Employers must adhere to the minimum notice period stipulated in the Employment Act or the employment contract, with a preference for extending beyond the minimum to afford affected employees ample time for securing alternative employment.

Mandatory Notification to MOM: Employers are required to notify the Ministry of Manpower (MOM) within five working days of notifying any employee of their redundancy, provided the business has at least 10 employees. This process is facilitated online through MOM’s website.

During the Redundancy Exercise

Retrenchment Benefits: Employees with at least two years of service are entitled to retrenchment benefits, while those with less service may receive an ex gratia payment at the employer’s discretion. Disputes over retrenchment benefits can be addressed through the Tripartite Alliance for Dispute Management (TADM) or, if unresolved, the Employment Claims Tribunals.

EAP for Employees Aged 63 and Above: Employers must offer a one-off Employment Assistance Payment (EAP) to retrenched employees aged 63 and above, in line with Tripartite Guidelines for the Re-employment of Older Workers.

Payment of Salary: Employers must settle all due salaries, including payment for unused annual leave and any other entitlements, on the employees’ last working day.

Alternative Employment Assistance: Employers are encouraged to assist affected employees in finding alternative employment, possibly through collaboration with employment agencies.

Alternatives to Redundancy: Employers are urged to consider other options before resorting to retrenchment, such as redeployment within the company, temporary layoffs, or implementing a shorter work week, to mitigate the impact on the workforce.

This structured approach ensures a humane and legally compliant process of managing excess manpower while fostering a supportive and transparent workplace environment during challenging economic times.

(Source: Singapore Secretary Services)

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