In brief

Recognizing that retrenchments may now be inevitable for businesses continuing to be negatively affected by COVID-19, the Ministry of Manpower (MOM), the National Trades Union Congress (NTUC) and the Singapore National Employers Federation (SNEF) (collectively, the Tripartite Partners) have jointly updated the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (TAMEM) to provide guidance on how to carry out a responsible retrenchment exercise.

The key changes to the TAMEM are new guidelines to:

  • maintain a strong core of Singapore and Permanent Resident employees (the Singaporean core) when selecting for retrenchment, incorporating the key principles of NTUC’s Fair Retrenchment Framework
  • conduct retrenchments responsibly, sensitively and provide support to affected employees

Recommended actions

Employers should bear in mind that although the TAMEM is advisory in nature, the Tripartite Partners in general and the MOM specifically have wide powers to intervene in those termination processes, including retrenchment and redundancy exercises, which could give rise to employee complaints or are perceived to be unfair or not undertaken responsibly, particularly if the Singaporean core is affected.

Accordingly, the employer should be aware of all the guidelines from planning the retrenchment to after its conclusion, to avoid possible repercussions arising from failure to heed the TAMEM. At the very least, an employer should adopt the Responsible Retrenchment Practices Checklist set out in Annex B of the TAMEM. To ensure full compliance, we additionally provide detailed steps below for each of the following phases of the retrenchment exercise, and summarize the key underlying considerations for each phase, when:

  • planning the retrenchment
  • executing the retrenchment
  • preparing notifications
  • scoping benefits

We would be happy to advise you further to ensure your HR and other policies are in full compliance with MOM’s expectations.

In more detail

We summarize the TAMEM guidelines across each phase of the retrenchment exercise, below:

Phase of the retrenchment exerciseKey considerations
Planning: consider/implement alternativesProvide the Singaporean core employees with reskilling, training and redeployment opportunitiesMOM requires employers to reach a conclusion that retrenchment is inevitable after considering or implementing alternative measures.

Note that, in order for the termination to be considered a retrenchment, the employer should not plan to fill the vacancy any time soon otherwise the termination may additionally be subject to the Tripartite Guidelines on Wrongful Dismissal and the Employment Claims Regulations 2017

Deploy employees with new skillsets and competencies to cover different roles
Tap on training support schemes and redeployment programmes under the SGUnited Jobs and Skills Package
Accelerate formation of Company Training Committees and midcareer conversions to:

  • identify potential job displacements
  • take a pre-emptive approach to reskill at-risk employees
  • redesign jobs
Adopt cost-saving measures to preserve jobs and keep the business viable through:

  • adjustments to work arrangements without wage cuts
  • adjustments to work arrangements with wage cuts
  • direct adjustments to wages
  • no-pay leave

These measures are set out in increasing severity of impact, and must adopt the following principles:

  • close consultation and transparency: employers should engage unions and employees to discuss and reach an agreement
  • management is expected to lead by example
  • comply with all Commissioner for Labour notification requirements
Execution: adopt responsible retrenchment practicesShow objectivity in employee selection:

  • based on objective criteria such as the ability, experience, and skills of the employee to support the company’s sustainability, workforce transformation and/or future business needs
  • apply criteria consistently, with no discrimination based in age, race, gender, religion, marital status and family responsibility, or disability
Employers should:

  • be guided by responsible retrenchment practices and treat the affected employees with respect
  • note whether the employee is pregnant or falls under a protected class under the Retirement and Re-employment Act
  • take a long-term view of the need to maintain a strong Singaporean core
Maintain a strong Singaporean core:

  • retain proportionately more locals during a retrenchment exercise
  • tap on Capability Transfer Programme to speed up the transfer of niche or business-critical skills of the foreign employees to local employees
Notifications: communicate clearly, respectfully and with compassionCommunicate early the intent to retrench, and the communication should cover:

  • the company’s efforts to manage business challenges
  • the business situation faced by the company resulting in the need for a retrenchment exercise
  • how the retrenchment exercise will be carried out
  • factors that will be considered
  • assistance being offered to those affected

(If the company is unionized, the relevant union(s) should be notified early, usually one month before affected employees are notified.)

All communications should be clear and timed sensitively, to allow employees to be mentally prepared for the eventuality
Adopt good practices when notifying affected employees:

  • prepare responsible managers to deliver the news in a sensitive manner
  • have on site HR personnel and union representatives (for unionised companies) to take feedback and answer queries
  • maintain an open channel (whether in-person or over the telephone) for further questions
  • allow employees the time and space to adjust to the news, before requesting them to vacate their workplaces
  • where there are no legitimate reasons to do so, do not require affected employees to leave workplaces abruptly or to be escorted out by security officers
  • offer counselling support where necessary
Hold back publication of notices of retrenchment to after such early communications.
Provide a longer notice period (beyond contractual or Employment Act requirements) where possible
Comply with the Mandatory Retrenchment Notifications requirement under the Employment Act
Benefits: be aware of norms and offer other job support measuresGrant employees with less than 2 years’ service an ex-gratia payment at the employer’s discretionThe Tripartite Partners accept that an employers’ ability to pay retrenchment benefit depends on its financial circumstances at the point in time.

Nonetheless, the TAMEM recommends offering a reasonable sum as well as other job support measures.

Should the retrenchment exercise follow a salary cut, the salary prior to the cut should be used to compute the retrenchment benefit, so that cuts are not implemented just to reduce retrenchment payments.

Note that employees with 2 years’ service or more are eligible for the following retrenchment benefits:

  • the quantum provided for in the contract of service; or
  • in unionized companies, the quantum stipulated in the collective agreement (the norm being one month salary for each year of service); or
  • quantum negotiated between the employees and the employer (the prevailing norm varying between 2 weeks to one month salary per year of service, depending on the financial position of the company and the industry norm)
Help affected employees look for alternative jobs in associate companies, in other companies or through out-placement assistance programs
Provide supporting documentation (such as referral letters, service records and past training certificates) to facilitate the job search
Work with the unions, SNEF, Singapore Business Federation and agencies such as Workforce Singapore, NTUC’s Employment and Employability Institute, Job Security Council and UPME Centre, to provide activities that improve jobseekers’ employability and help jobseekers secure employment or provide a post-retrenchment training package

 

Full compliance with the TAMEM will not only protect the employer from MOM intervention, but also prevent adverse publicity. Avoiding these negative repercussions are important for such time when the business or commercial environment recovers, and will prevent that employer from being subject to MOM’s curtailment of work pass privileges or prejudiced by a poor perception from future hires and potential employees.

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