Employers must pay retrenchment benefit if job cuts are inevitable: MOM

RETRENCHMENT should be a last resort for companies to manage manpower costs, and those that have no choice but to do so should treat their employees with empathy and provide them a retrenchment benefit, an advisory from the Ministry of Manpower (MOM) said on Wednesday.

Employers who are in sound financial position should continue to pay retrenchment benefit according to their existing employment contracts, collective agreements, memoranda of understanding or the prevailing norms for retrenchment benefit, the ministry said.

In the case of prevailing norms, a tripartite advisory on managing excess manpower and responsible retrenchment released in March recommended payment rate of between two weeks and one month salary per year of service.

Other guidelines in the tripartite advisory touch on the fair selection of employees for retrenchment, early consultation with unions, early communication to affected employees and employment facilitation for affected employees.

Employers whose business have been adversely affected by the pandemic should work with the union or the employees to renegotiate for a fair retrenchment benefit linked to the employees' years of service, MOM said.

As for those that face severe financial difficulties and are on the brink of ceasing business, MOM said retrenchments may be necessary to keep the business afloat and to preserve some jobs.

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In such cases, employers that are unionised should negotiate with their unions for a mutually acceptable retrenchment benefit package, the ministry said.

It added that non-unionised employers should support their retrenched employees by providing a lump sum retrenchment benefit.

"Instead of linking retrenchment benefit to employees' years of service, a lump sum of between one and three months of salary could be provided, taking into consideration the JSS pay-outs that employers have received and their financial position," MOM suggested, referring to the Jobs Support Scheme.

Given the wide range of measures the government has introduced to help employers manage manpower costs, such as training grants and wage support, the ministry emphasised that retrenchment should always be a last resort.

In the case of retrenchment however, the ministry urged employers to be more generous towards their lower-wage employees, particularly those who qualify for the Workfare Income Supplement scheme. This could be in the form of providing them with more weeks of retrenchment benefit payout per year of service or additional training grants.

"In addition, employers should consider and assess all relevant factors carefully, including the impact of retrenchment on the livelihoods of the affected employees," MOM said.

Employers should also support their retrenched employees in seeking new employment, either through their business networks or by referring them to Workforce Singapore or Employment and Employability Institute, the ministry said.

Employers planning to undergo a restructuring or retrenchment exercise should also join NTUC's Job Security Council, MOM added. The council supports both employers and displaced employees, and helps to match the latter with other employers within its network.

MOM also reminded employers to notify the ministry in the event of a retrenchment exercise. This applies if they have at least 10 employees and are retrenching five or more employees within any six-month period.