Retrenched in Singapore? Know Your Employee Rights

Last updated on April 14, 2023

colleague looking at another colleague holding a box leaving the office

Between 2022 and 2023, big tech companies like Google, Amazon and Microsoft announced workforce reductions across all sectors. The slowdown in economy and fall in profitability are often cited as reasons for workforce reductions. Singapore, being an open economy, is highly exposed to such fluctuations in the global economy. As businesses adjust their operations, some employees will be affected. 

Losing your job can be a traumatic experience and dealing with the emotional fallout of a job loss can be difficult. During a company’s retrenchment exercise, employers have obligations while employees have certain rights.

This article aims to help you, an employee, understand what those rights and obligations are and what you can do if those rights have been infringed. It will cover:

What Does It Mean to be Retrenched, Laid-off or Made Redundant?

“Retrenched”, “laid-off” or “made redundant” are all terms used to describe unemployment that are very similar and often used interchangeably. However, there are some differences between them. In all three circumstances, it is important to bear in mind that the employees are not at fault and the decision to retrench or lay off an employee is not a reflection of their performance.

A layoff is when an employer temporarily terminates the employment of a work, usually due to a downturn in business or a lack of work. Employees may be rehired when business improves or when new work becomes available. During the laid-off period, employees are not paid a salary but are paid laid-off compensation. Temporary lay-offs do not terminate the employment relationship; in effect, the employment relationship is paused. The employer may recall the employee back at the specific date after which the employment relationship generally continues.

A retrenchment, on the other hand, is a form of layoff which involves permanent termination of employment. Unlike layoffs which are generally used to reduce the workforce during business periods, retrenchment is a strategy to restructure the entire organisation and reduce corporate expenses. This can happen in response to economic slowdown or as a result of merger or acquisition, including company takeovers in the case of Elon Musk and Twitter.  

Redundancy occurs when a specific role is no longer required because of operational change within a company. Reasons for operational change include installing new processes or equipment that replace a job currently performed by the employee or company restructuring due to economic downtrend. Once the position is made redundant, the employee holding that role can either be redeployed into another role or retrenched.

For example, if a business is in a downturn, the company may think about what skills are least needed now and make those positions redundant. This means reducing or eliminating positions that contribute the least to income, have skills that are the easiest to replace or have duties that are moved to other positions.

Currently, in Singapore, there is no overarching law that statutorily protects retrenched workers. The benefits upon retrenchment depend on the company’s policy of severance package and retrenchment benefits as well as your terms of contract of employment.

The terms in the employment contract outline the details of the employment agreement and are binding on you and your employer. The employment contract should therefore be the first recourse for an affected employee, followed by the company’s internal policies or other regulations.

Terms of your retrenchment benefits 

Who is eligible for retrenchment benefits?

According to the Employment Act (EA), an employee who has been in continuous service with an employer for at least 2 years is entitled to retrenchment benefits on his or her dismissal. However, employers may provide employees with less than 2 years’ service retrenchment benefit out of goodwill, as an ex gratia payment.

It is important to note that the EA only governs employees working under a contract of service, regardless of whether the employee is a local or foreign employee. The EA does not cover employees who work less than 35 hours a week. Instead, these are part-time employees covered by the Employment of Part-Time Employees Regulations. Self-employed persons, seafarers, domestic workers and statutory board employees are also not covered by the EA. Instead, their employment terms will be set out in their employment contract. 

For more information, you may refer to our other article on who is covered by the EA

What is the amount payable for retrenchment benefits?

The EA does not specify the quantum of retrenchment benefits. Therefore, the amount would likely depend on the company policy and terms of the employment contract.

The Tripartite Advisory on Managing Excess Manpower and Responsible Entrenchment (referred to as the “Advisory” in this article) urges companies to pay employees retrenchment benefits of 2 weeks to 1 month’s salary per year of service. The exact amount will vary depending on the financial position of the company and industry practices. The advisory is not legally binding on the employers but it sets out fair work practices that the employer is highly encouraged to abide by. In the event a legal proceeding is commenced, 

these objective guidelines help to establish a fair standard when assessing liability.

What if I’m not paid any retrenchment benefits or wish to dispute my retrenchment benefit?

If your company fails to pay out your retrenchment benefit or if you are disputing the amount of benefit, you may opt to file a salary-related claim or undergo mediation at the Tripartite Alliance for Dispute Management (TADM). 

Generally, retrenchment claims cannot be heard at the Employment Claims Tribunal because providing retrenchment benefits is not compulsory under the EA. However, if your employment contract or collective agreement provides for retrenchment benefits, you may consider escalating the claim further to the Tribunal if the issue cannot be settled between you and your employer. The Tribunal holds the authority to make orders against the employer to pay the deserved retrenchment benefit and order costs. More information regarding the Employment Claims Tribunal can be found here.

If your company is undergoing bankruptcy proceedings, judicial management or liquidation, you cannot file a salary-related claim with TADM. Instead, you should file a claim directly with the Insolvency Office or the appointed judicial manager or liquidator of the company. It would be advisable to consult a lawyer on the possible avenues for legal recourse, which may differ from case to case. 

Serving notice for retrenchment

Employers should inform employees about an upcoming retrenchment exercise as well as the reasons for it. Employers are also legally required to serve notice to employees according to the terms of the employment contract or, in the absence of such provision, the notice period must be in accordance with the EA (provided the employee is covered by the EA). 

The period of service and the corresponding notice period required is illustrated in the table below.

Length of Service Notice Period
Shorter than 26 weeks 1 day
26 weeks to shorter than 2 years 1 week
2 years to shorter than 5 years 2 weeks
5 years and above 4 weeks

You may wish to request for a longer notice period than what is legally required so that you have sufficient time to help facilitate your transition to a new role or make alternative employment arrangements.

Medical benefits 

Employers are not legally bound to help employees maintain their existing medical benefits. However, responsible employers should restructure existing medical benefits and provide additional MediSave contributions or other flexible benefits. These payouts will contribute to the employee’s MediShield Life or Integrated Shield Plan premiums (if applicable).

Maternity benefits 

If an employee is pregnant during retrenchment, she is entitled to maternity leave benefits if she meets the eligibility criteria under the EA or Child Development Co-Savings Act. This payment will be in addition to her retrenchment benefits.

Under the Child Development Co-Savings Act, a working mother will be entitled to 16 weeks of Government-Paid Maternity Leave commensurate with her usual monthly salary during the leave period. Your eligibility depends on the following criteria:  

  • Your child is a Singaporean citizen
  • You are legally married to the father of the child’s father
  • Your child is born or has estimated delivery date on or after 1 January 2017
  • You have worked for your employer or have been self-employed for at least 3 continuous months before the birth of your child

Leave applications and reimbursement claims can be applied through the Government-Paid Leave Portal.

Shares/Restricted stock units (RSUs)

RSUs are company shares issued to be vested to the employees according to a schedule. Stocks are granted typically after the employee has fulfilled a certain length of employment or hit performance. Afterwards, these stocks can then be freely transferred and sold.

In Singapore, RSUs are a matter of contract between the employer and the employee and are not governed by any legislation. Companies would commonly allow retrenched employees to keep any vested incentive awards while unvested awards lapse. In most responsible retrenchment, the norm would be to allow shares that mature in the next 3 months to be vested or pay a prorated sum as an ex gratia payment.

What If I’m Aged 63 and Above, and Have Been Retrenched?

According to the Retirement and Re-employment Act (RRA), the minimum retirement age in Singapore is 63 years. Under Singapore’s laws, employers are obligated to offer workers above 63 years of age re-employment until the age of 68.

However, if your employer cannot find a suitable job for you within the organisation, they can offer you an Employment Assistance Payment (EAP) as per the Tripartite Guidelines for Re-employment of Older Workers

The EAP is a one-off payment equivalent to 3.5 months’ salary, subject to a minimum of S$6,250 to a maximum of S$14,750. For a senior employee that has been re-employed for at least 30 months since turning 63, a lower EAP amount of 2 months of salary could be considered, subject to a minimum of $4,000 and a maximum of $8,500.

What If I Had Relocated to Singapore and was Subsequently Retrenched?

Whether or not your company will provide you with retrenchment benefits is discretionary and dependent on your company’s relocation policies as well as the terms of your employment contract.

If a foreign employee who was issued an S pass, employment pass or personalised employment pass is repatriated, the employer is liable for the repatriation costs unless the pass holder had contractually agreed to pay for such costs.

Retrenchment is a different situation from having your job offer rescinded before you even started employment. 

What Does It Mean For My Company to Carry Out Retrenchment “Responsibly”?

The Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) provides the Advisory and general guidelines for responsible retrenchment such as notifying affected employees as soon as possible, providing the reasons for retrenchment and communicating openly and compassionately with employees.

TAFEP issued the Advisory for employers to fairly and compassionately carry out the retrenchment process. The Advisory encourages employers to consult the unions, consider alternative solutions and provide support to retrenched employees.

You may refer to this page for more on TAFEP’s guidelines. 

During retrenchment, employees should refer to their employment contract for the details of their severance packages. The notice period would also give them a preparation runway for the next step.

If any of your legal rights are infringed or certain employer’s obligations are not adhered to, you can consult an employment lawyer in Singapore for further assistance to better ascertain your legal rights. 

Alternatively, you may consult the Ministry of Manpower or TAFEP for lodging a claim and mediating retrenchment benefit disputes. 

For further emotional support in navigating retrenchment, My Careers Future has collated some resources on how to manage negative emotions and plan ahead. 

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