What bosses in Singapore now need to know before retrenching staff

In order to strengthen the support for affected companies and workers, the tripartite partners - the Ministry of Manpower (MOM), the Singapore National Employers Federation (SNEF) and the National Trades Union Congress (NTUC), have revised the Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment.

This revised guideline emphasises the need for companies to maintain a strong Singaporean core and avenues to help workers who have been displaced.

“As companies restructure in their efforts to raise productivity as well as amidst slower growth, organisational rightsizing will be necessary and some redundancies may be unavoidable," said Koh Juan Kiat, SNEF's executive director.

"As local workforce growth is expected to grow by only 1.0% per annum until 2020, we urge employers to take a longer term view of their manpower needs and make efforts towards strengthening their competencies and maintaining a strong Singaporean core. These will enable their companies to seize growth opportunities quickly once their business rebounds," Koh advised.

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Before laying off excess manpower, the new guidelines urges employers to consider other cost saving measures such as:

Redeploying employees to alternative areas of work within the organisation Employees who can be re-deployed or rotated to alternative areas of work should also be provided with the relevant training for the new role.

When no other job is available within the organisation, companies can consider outplacing the affected employees to suitable jobs in other companies, taking into consideration their physical and mental conditions, skills and experience.

Implementing alternative work arrangements In order to reduce cost, companies can implement a shorter work week, temporary layoff, part-time work, sharing of jobs and flexible work schedule.

It is noted that workers and trade unions (if workers are unionised) should be consulted on the implementation of such work arrangements and that the level of payment to be given to the affected workers, should take into consideration the performance and financial position of the company.

Flexible Wage System Companies with a flexible wage system in place that require a reduction in manpower costs to avoid retrenchment, may consider adjusting the various wage components in consultation with the union or workers concerned.

Examples of adjustments to the various wage components include:

• Reducing or removing the variable bonus payment during business downturn.
• Reducing or freezing the annual wage increment depending on the company’s financial position.
• Companies with a monthly variable component (MVC) in place can consider adjusting the MVC downwards depending on the severity of the downturn, the company’s situation and any key performance indicators or guidelines for triggering an MVC cut as agreed with the union or workers.
• Companies without the MVC in place that need to adjust wages downwards can consider treating any cut in basic salary of up to 10% (for management staff, it could be more than 10%) immediately as MVC cut. The company should set clear guidelines to restore the MVC cut through future wage increases or adjustments when their businesses recover.
• Should business conditions continue to worsen, organisations can consider reducing the annual wage supplement (AWS) - which is usually one month’s salary to be paid at the end of the year.

"The tripartite partners recognise that some companies may have to implement more severe cost cutting measures, in addition to measures such as shorter work week and temporary layoff. These companies may have to consider implementing no pay leave, in order to survive and to save jobs as the downturn prolongs," the guidelines stated.

READ MORE: MOM targets “stronger Singaporean core” through support for SMEs

When implementing no pay leave, it is noted that companies should have already considered implementing other measures and if the company is unionised, should have already consulted workers and unions. During the no pay leave period, companies are encouraged to send the affected workers to training to help upgrade workers’ skills and employability.

NTUC Assistant Secretary-General, Cham Hui Fong said: "While retrenchment may sometimes be inevitable, companies should conduct the retrenchment exercise in a fair and sensitive manner. Unionised companies should inform their unions earlier on any impending retrenchment and work with unions closely to ensure that fair retrenchment packages are offered and displaced workers are assisted with proper outplacement services."

The revised guidelines state that the selection of employees for retrenchment should be based on objective criteria such as the ability of the employee to contribute to the company’s future business needs and conducted fairly.

It notes that firms should not discriminate against any particular group on grounds of age, race, gender, religion, marital status and family responsibility, or disability and that companies should follow prevailing guidelines on fair and progressive employment practices.

In the case of retrenchment, unionised companies are encouraged to consult the unions as early as possible, with the norm being one month before notifying the employee.

It noted that communication to employees affected should also be done early and before the public notice of retrenchment is given and employees should be given time to prepare for and look for alternative arrangements.

Additionally, all salaries due and retrenchment benefits should be paid to the affected employees by the last day of work.

The full guidelines can be found here.

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