What You Need To Know About Layoffs And Retrenchment

• Published date: 06 December 2022
• Subject Matter: Employment and HR, Contract of Employment, Unfair/ Wrongful Dismissal, Employee Benefits & Compensation, Redundancy/Layoff
• Law Firm: Withers LLP
• Author: Ms Amarjit Kaur

The recent spate of widespread layoffs by tech behemoths such as Twitter and Meta marks a drastic shift away from the rapid and aggressive hiring in the tech sector during the pandemic.

Most recently, Google's investor, TCI Fund Management issued a missive that it will take "aggressive action" to rein in headcount and reduce salary expenses in the throes of an economic downturn.

With indiscriminate hiring comes inevitable firing as the world braces for macroeconomic headwinds of a global recession and mounting inflation.

As revenue growth is slowing across many industry sectors, this could well be the beginning of a ripple effect which spreads more widely than the tech industry.

What should employees in Singapore understand about retrenchment with potentially more layoffs looming on the horizon?

What is a retrenchment?

First off, let's understand how retrenchment is defined in Singapore. Retrenchment is the termination of a permanent or contract employee's (minimum six-month term) employment due to redundancy or reorganisation of the employer's profession, business, trade or work.

This typically occurs when a company undergoes major structural changes which could result in downsizing or restructuring, leading to diminishment or transformation of existing roles. Retrenchments could also be the result of mergers, liquidation or judicial management.

There is a presumption of retrenchment if the employer has no plans to back-fill the vacancy in the near future.

A protection that the Ministry of Manpower (MOM) put in place to protect retrenched employees is the requirement that companies with at least 10 employees are obliged to notify the MOM of the retrenchment of every employee, within five days of notifying each employee of the retrenchment. This mandatory notification compels employers to furnish information on whether retrenchment benefits were paid and whether other forms of non-monetary assistance were provided.

No mandatory retrenchment benefits

Alas, there is no mandatory retrenchment payment regime in Singapore. The Employment Act states that employees who have worked with an employer for less than two years are not entitled to retrenchment benefits, thereby implying that employees who have served at least two years or more may be eligible for such retrenchment benefits. In any event, the Employment Act does not specify the quantum of such benefits.

If the employment contract (or collective agreement with Unions) stipulates the quantum of...