Retrenchments in Singapore in the Time of COVID-19: Dos and Don’ts for Employers

Workforce retrenchment in Singapore is expected to hit record numbers as a result of economic disruption from the coronavirus (COVID-19) pandemic. Here is a brief guide for employers in Singapore as they consider retrenchment as an option.

In the wake of the coronavirus (COVID-19) pandemic that continues to disrupt the global economy, many employers worldwide are left with no choice but to reduce staff to cut costs and survive. Singapore, as one of the world’s most open economies, is not immune to this. It has been estimated by local economists that retrenchments in Singapore in 2020 could be between 45,000 to 200,000[1], which would be a record. Morgan Lewis has previously released other LawFlashes dealing with the impact of the pandemic on other business aspects, such as the conduct of shareholder meetings, control measures for telecommuting and safe distancing in workplaces.

In response to this predicted wave of retrenchments, Singapore’s Ministry of Manpower (MOM) has been issuing a number of employment law advisories to guide the implementation of retrenchment during this period. These guidelines seek to strike a balance between allowing employers to fairly retrench their employees where necessary, and to protect employees as far as possible where retrenchment is not strictly required. These advisories complement the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment guidelines[2] (Tripartite Guidelines), which are similarly promulgated by the MOM (together with the National Trades Union Congress and Singapore National Employers Federation) to set out standards for employers to follow when retrenching employees.

Against this backdrop, Morgan Lewis Stamford has been receiving an increased number of requests for legal advice on how to effect retrenchments while complying with these MOM advisories and the Tripartite Guidelines.

The following is a brief guide on some of the considerations that employers in Singapore should keep in mind when determining if retrenchment is an option:

• Retrenchments should be a last resort: Retrenchment of employees should be a last resort. Alternative cost-saving measures to retrenchment should be considered, such as sending employees for government-subsidised training courses, redeployment of excess manpower to other jobs within the company or introducing the concept of a “time bank,” where workers are paid in advance for hours worked in the future.
• Retrenchment benefits should be paid to retrenched employees: employers who are financially sound should pay their employees retrenchment benefits as set out in the Tripartite Guidelines. This would normally be between two weeks’ to one month’s salary per year of service. Employees should also be paid any retrenchment benefits they are entitled to under their respective terms of employment and/or union agreements. Employers who have been adversely affected and need to retrench their workers should negotiate a fair retrenchment package with their employees linked to the number of years of service. Employers who are facing financial difficulties should still consider paying lump sum retrenchment benefits to retrenched employees of between one to three months’ salary, taking into consideration the financial support provided by the Singapore government under the Jobs Support Scheme. All outstanding salaries and benefits must be paid before the last day of work.
• Retrenchment benefits for lower-wage employees should be more generous: lower-wage employees should be given a more generous retrenchment package as compensation, which can include training grants. Employers should also consider if retrenchment is necessary for these lower-wage employees, given the impact on their livelihoods.
• Emotional and economic support for retrenched employees: if retrenchment is unavoidable, then the employee should be given advance notice and the reasons for the retrenchment. Employers should also provide counselling where necessary, and provide support for the employee in seeking new employment e.g. recommending jobs in associate companies, referring them to governmental agencies such as Workforce Singapore and/or providing supporting documentation where relevant to facilitate his or her job search.
• Notifying the Ministry of Manpower: if an employer has more than 10 employees and retrenches more than five of them in a six-month period, the MOM must be notified.

The Tripartite Guidelines and advisories from the Ministry of Manpower and its partners provide a detailed and prescriptive framework for how employers in Singapore should consider and effect retrenchments. Employers in Singapore are encouraged to observe and adhere to these guidelines, which may become a potential minefield for foreign and local employers unfamiliar with Singapore employment laws. As such, it would be prudent for all employers to obtain legal advice on their rights and obligations before embarking on any retrenchment exercises.

ADDITIONAL RESOURCES

We have also discussed issues relating to employment law and workplace measures in Singapore in our February 20, 2020, LawFlash: Responding to the 2019 Novel Coronavirus: Guidance for Singapore Employers.

Coronavirus COVID-19 Task Force

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Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers, who are directors of Morgan Lewis Stamford LLC, a Singapore law corporation affiliated ‎with Morgan, Lewis & Bockius LLP:

Singapore
Wai Ming Yap
 

[1] See Covid-19: Economists expect S'pore retrenchments in 2020 to hit 45,600 to 65,000 and Covid-19 pandemic could lead to 150,000 to 200,000 retrenchments, say Maybank economists.

[2] See Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (Updated March 2020).