Why a baseline retrenchment benefit legislation isn't on the cards in Singapore

The question of whether a baseline retrenchment benefit should be legislated is not new in Singapore. Whilst it has been debated in Parliament previously, the matter came up for discussion once again with members in session on 6 October 2020. 

Responding to a series of questions around retrenchments, Josephine Teo, Minister for Manpower, addressed the question of mandating minimum retrenchment benefits head on, by explaining why, after extensive deliberation, the tripartite consensus is that it does not guarantee better outcomes for retrenched employees.

She said: "The legislated baseline would likely become the default. Even when employers can afford to pay more, they would be unlikely to do so. On the other hand, setting a high baseline retrenchment benefit would strain the financial health of businesses that are already struggling, and potentially jeopardise their viability and the jobs of the remaining employees.

"With legislated retrenchment benefit, employers would also be less likely to offer long term or permanent contracts to employees, and resort more to hiring employees on short-term contracts."

Therefore, while recognising the usefulness of retrenchment benefit and encourages employers to pay according to prevailing norms, presently the focus is more on helping retrenched workers return to the workforce. This is in the form of heavy subsidies for skills programmes as well as substantial training and wage support to employers while their new hires undergo conversion programmes.

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The support and focus on helping locals get better jobs comes in the form of programmes such as Jobs Growth Incentive to spur employers to expand local hiring (with double the support for new hires aged 40 and above), SGUnited Mid-Career Pathways Programme to help mid-career locals gain relevant work experience through company, and expansion of the SGUnited Skills programme which offers full-time training programmes ranging from 6 to 12 months.

These are above and beyond the programmes offered for seniors, which include lower employer CPF contribution rates, Special Employment Credit to employers to offset wages of Singaporean workers aged 55 and above, Productivity Solutions Grant for employers who wish to redesign jobs to be better suited for senior workers, and the Part-time Re-employment Grant to encourage more employers to offer part-time opportunities for senior workers.

Minister Teo also took the opportunity to provide data on the retrenchments in Singapore this year, noting that retrenchments have risen and exceeded the peak observed in the SARS outbreak of 2003 but are still lower than that during the Global Financial Crisis of 2009. "Nonetheless, MOM monitors it closely," she affirmed. 

In the first half of 2020, the incidence of local retrenchment was 4.9 per 1,000 local employees. The incidence of local retrenchment for senior workers aged 60 and above was generally comparable, at 5.2 per 1,000 local employees.

As for employees on fixed-term contracts, they constitute about 8% of all employees in the workforce. The number of contracts not renewed in the first half of 2020 has remained stable compared to the second half of 2019. MOM does not have data on non-renewals of contracts by age groups. 

Photo / 123RF

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