Retrenchment Practices In Singapore ' A Balance Of Employer And Employee Interests

• Published date: 22 March 2024
• Law Firm: Dentons Rodyk & Davidson
• Author: Ms Marian Ho, Sean Gallagher and Wei En Tan

I. Introduction

1. The recent layoffs in Singapore by major tech companies including Lazada, Shopee, Grab and Google, has caused much trepidation among workers in Singapore. This has been compounded by the recent labour market estimates released by the Ministry of Manpower (MOM), which reported that retrenchments in Singapore in 2023 were more than double that of 2022.
2. While employers have the right to lay off redundant workers due to changing workforce requirements and technological advancements employees too have the right to be retrenched in a fair and responsible manner. In this article, we will discuss the retrenchment practices which should ideally be followed by employers in Singapore to achieve a fair balance between the interests of employers and employees.

II. Definition of retrenchment

3. As a starting point, there is no statutory definition for the term "retrenchment". Instead, the Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) provides that retrenchment is a "reduction of an organisation's workforce, usually due to business or economic reasons". The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (the Retrenchment Guidelines) further provides that an employee is presumed to have been retrenched if the employer cannot show a plan to fill the vacancy any time soon.
4. Unlike the termination of employment on grounds such as poor performance or misconduct, retrenchment occurs when employees are discharged due to reasons of excess manpower or redundancy.

III. Obligations of employers and rights of employees during retrenchment

5. In Singapore, there is no legislative framework for the retrenchment of employees. The Employment Act 1968 (the Employment Act) provides that an employee who has been in continuous service with an employer for less than two (2) years is not entitled to any retrenchment benefit in the event that such employee is retrenched. The Employment Act does not specify when an employee will be entitled to any retrenchment benefit, or what such retrenchment benefits will be.
6. As retrenchment benefits are not mandated by law, the amount of retrenchment benefit depends on what is provided for in the employment contract, memoranda of understanding or collective agreement (for unionised companies). If there is no contractual provision, it is to be negotiated between employees (or their union) and the employers.
7. Notwithstanding that the employee is being terminated as part of a retrenchment...