How to handle retrenchments responsibly

Experts from Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) share how HR and employers can ensure an amicable retrenchment journey for both the firm and employees, drawing on lessons from a case study in Singapore.

In May 2019, an established retail operator announced that it was bowing out of its current business at a prominent shopping district once the store lease expired at the end of the month.

With a few hundred people employed at this flagship retail store, the news made headlines and invited much speculation. The company conveyed through a media statement that it would ensure a smooth handover to the new operator, and would provide staff with the option of being deployed to other retail locations in Singapore.

In a drastic turn of events, shortly after its announcement, the company laid off 50 staff with immediate effect. There was no prior warning, nor any communication in the form of circulars or memos indicating that the retrenchment would happen.

The Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) engaged the company and found the retrenchment exercise to be poorly managed, given that it was not done in line with the Tripartite Advisory (TA) on Managing Excess Manpower and Responsible Retrenchment:

• Employees were not notified in advance about their retrenchment;
• Employees were made to acknowledge and accept their retrenchment packages within three days, failing which they would not receive any retrenchment benefits;
• Employees were paid only for one week per year of service, in retrenchment benefits capped at eight years; and
• Employees did not receive job placement assistance.

Following the session with TAFEP, the company understood its employment obligations and raised the retrenchment benefits for its affected employees. Further, it committed to improving its communications on the restructuring and employment facilitation efforts through dedicated face-to-face sessions with affected employees.

Before the public notice of retrenchment is given, employers should inform employees about the upcoming retrenchment and provide information such as the current business situation, the way the retrenchment exercise is to be conducted, selection criteria for retrenchment, and types of assistance available.

Employers should also follow the recommendations listed in the respective TA:

• Notify the Ministry of Manpower and unions of retrenchment to facilitate employment facilitation in a timely manner;
• Select employees for retrenchment fairly;
• Communicate early and offer retrenchment benefits at the prevailing norm; and
• Provide employment facilitation to affected employees.

Disclaimer: The case study is based on an actual case handled by TAFEP. The names and identifying details in this case have been changed to protect the privacy of individuals and companies.

TAFEP provides information and resources to help employers and HR professionals keep abreast of HR best practices. Visit tafep.sg to find out more.