Why Singapore is not in favour of mandatory retrenchment benefits

In the past year, Singapore has seen a number of significant retrenchment announcements - Resorts World Sentosa let go of 400 employees, including croupiers and pit managers; Keppel reduced its workforce by about 8,000 in first three quarters of 2016; and most recently, Surbana Jurong was reported to terminate about 50 staff.

These developments weigh heavy on the job market, and in a recent parliamentary session, MP K Thanaletchimi asked how many companies, and in which industries have included retrenchment benefit clauses in their employment contracts. She also asked if the Ministry is rendering assistance to those retrenched without benefits, and if it will consider imposing some baseline retrenchment benefits to help workers tide over the period.

Lim Swee Say, Minister for Manpower, responded, saying that the tripartite partners have deliberated extensively on whether to make retrenchment benefits mandatory, and to specify the minimum quantum in the Employment Act.

He explained the rationale for opting out of such a policy: "We have concluded that it may not necessarily be beneficial for both workers and businesses. A mandated level of minimum retrenchment benefit will likely become the norm, and would not benefit the workers in cases where the employers are able to pay higher amounts."

In this line, he noted if a minimum quantum is set too high, companies may not be able to afford it, especially when they are downsizing under difficult conditions. He added that overburdening companies will also have a negative impact on the remaining workers, as they strive to restructure and turn around the business.

"Instead, the tripartite partners issue guidelines which stipulate the prevailing norms for retrenchment benefits quantum. These norms can be updated from time to time," he cited as a solution.

Existing rules on retrenchment benefits

Currently, for workers who have served more than two years, payment of retrenchment benefits is mandatory if it is specified in their individual employment contracts or the collective agreements negotiated by their unions.

According to Ministry of Manpower's (MOM) survey on retrenchment benefits in 2015, in 2015, nine in 10 organisations (91%) paid retrenchment benefits to eligible employees, down slightly from 94% in 2012. Among these, large establishments with at least 200 employees (97%) and unionised establishments (100%) were more likely to pay retrenchment benefits.

Minister Lim noted the survey showed "it was not a widespread practice for employers to specify the quantum of retrenchment benefits in their employment contracts, except for the unionised sector where a majority of the collective agreements specify the quantum of retrenchment benefits."

He added that since 1 January 2017, it has become mandatory for employers to notify MOM of retrenchments.

Status on employee count in Singapore's establishments

While on the topic of headcount, MP Sun Xueling asked Minister Lim the number of companies in Singapore who hire more than 100 employees from 1965-2015, and the the total number of employees hired by these companies. She asked the same question regarding hiring of more than 1,000 employees as well.

In response, he provided the following statistics:

Lead photo / 123RF