Responsible retrenchment

What constitutes a retrenchment

Retrenchments are defined as dismissal on the ground of redundancy or by reason of any reorganisation of the employer's profession, business, trade or work. This applies to permanent employees, as well as contract workers with full contract terms of at least 6 months. An employer who terminates an employment contract with no plan to fill the vacancy any time soon is presumed to have retrenched the employee.

Responsible retrenchment

Employers who are retrenching any employee must do so responsibly and fairly and should refer to the Tripartite Advisory below. Find out the considerations and requirements for retrenchments.

At a glance

Get help early before retrenching

Submit an early alert to us to receive outplacement support from WSG/e2i to assist your affected local employees with job search and training needs.

Retrenchment considerations

As an employer, if you plan to retrench workers, you should do the following before you retrench:

• Take a long term view of your manpower needs, including the need to maintain a strong Singaporean core.
• Consult with the union if your company is unionised.
• Not discriminate against employees or groups of employees and make your selection based on factors such as the ability to contribute to your company’s future business needs.
• Treat your affected employees with dignity and respect.
• Consider having a longer retrenchment notice period for all your affected employees.

During the retrenchment exercise, you:

• must pay all salaries, including unused annual leave, notice pay, etc., to your employees on their last day of work.
• should help your affected employees look for alternative jobs in associate companies, other companies or through outplacement assistance programmes, e.g. job fairs, career fairs, career advice.

Notify MOM of retrenchment

If you have decided and will be going through a retrenchment exercise, it is mandatory under the Employment Act for employers with at least 10 employees who have retrenched any employee to submit Mandatory Retrenchment Notification to MOM. The notification must be submitted within 5 working days of the employee being informed of their retrenchment.

Employers with less than 10 employees are not required to but are strongly encouraged to notify MOM of retrenchment.

Notify your employees of retrenchment

You must notify your employees of their retrenchment according to the terms for termination of employment in their contract of service.

If possible, you should give a longer notice period for your employees as they will need time to prepare and look for new jobs.

Retrenchment benefit

Retrenchment benefit is given to employees to compensate them for the loss of employment.

Who is eligible

Employees who have served the company for at least 2 years are eligible for retrenchment benefit. Those with less than 2 years’ service could be granted an ex-gratia payment out of goodwill.

Amount of compensation

The amount of retrenchment benefit depends on what is provided for in the employment contract or collective agreement (for unionised companies). If there is no provision, it will have to be negotiated between the employees (or their union) and the employer.

The prevailing norm is to pay a retrenchment benefit of between 2 weeks to 1 month salary per year of service, depending on the company’s financial position and the industry.

In unionised companies where the amount of retrenchment benefit is stated in the collective agreement, the norm is 1 month’s salary for each year of service.

Note:

• If the retrenchment comes shortly after a salary cut, the salary before the cut should be used to determine the amount of compensation.
• Both employee and employer do not have to pay CPF contributions for retrenchment benefit.

Help employees find new employment

You can work with unions, SNEF and agencies such as WSG, NTUC's U PME Centre and e2i to help affected employees find alternative employment.