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Update: What employers must know before retrenching employees in Singapore

In view of the evolving?COVID-19?situation, the?Ministry of Manpower (MOM), the National Trades Union Congress (NTUC), and the Singapore National Employers Federation (SNEF) have jointly updated the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (Advisory).

With businesses suffering sharp?declines in volume and revenue in some sectors,?some employers have started to implement cost-saving measures. The new update aims to provide?clearer guidance to affected employers on the appropriate measures to manage excess manpower.

Sharing the Advisory in a Facebook post,??NTUC Assistant Secretary-General Patrick Tay said: "In short, we urge companies to leverage on the various training and skills upgrading initiatives and funding to send workers for these programmes if there is excess manpower or downtime.

"Likewise, there are various measures such as a flexible work schedule for employers to adopt. Together with the Budget 2020 support measures, I hope employers will cut costs to save jobs and not cut jobs to save costs....retrenchment(s) should only be the last and final option and if needed be done fairly, responsibly and in a progressive manner."

Here are the key things to note:

Instead of retrenchment, implement a?Flexible Work Schedule (FWS)

A FWS would allow companies to optimise the use of manpower when they go through cyclical troughs and peaks, and employees are assured of a stable monthly income.

As businesses slow during this period, consider?creating a ?timebank? of unused working hours by reducing?weekly working hours and using them to?offset future overtime pay when working hours increase in subsequent periods.

In offsetting future overtime pay, the employee (or union if company is unionised) and employer may agree on the rate at which the accrued hours are to be valued. Employers who wish to implement FWS need to seek the support of the employees (and union if company is unionised) and thereafter apply to the Commissioner for Labour.

Employers required to inform MOM on any cost-saving measures from 12 March

With effect from today (12 March 2020), employers are also required to notify MOM if they implement any cost-saving measures during this period that affects the employees? monthly salaries, and indicate that they have done so fairly. The new requirement applies to employers with 10 or more employees and is intended to be a temporary measure until the economy recovers.

Focus on training and upskilling to benefit both employees and the business

The Advisory also highlights that during a business downturn, focusing on training and upskilling greatly benefits both employers and employees. Employers will be able to retain skilled employees to enable the company to meet business demand when demand rebounds. Employees can also take the opportunity to update themselves with better skills and knowledge to improve their productivity.

The Government provides significant support to employers who are prepared to invest and develop capabilities in their employees. Employers can tap on training support schemes under the SkillsFuture movement, redeployment programmes under the Adapt and Grow initiative, and other government grants.

During the announcement of Budget 2020 last month,?Deputy Prime Minister Heng Swee Keat rolled out a?Stabilisation and Support Package which aims to stabilise the economy and support workers and enterprises, by helping workers to stay in their jobs and enterprises with cash flow. The government will provide additional help to sectors more directly affected by the outbreak.

Just yesterday, he shared that a second stimulus?package is in the works, with a key aspect being to help workers keep their jobs. According to a CNA report, the new package will?also include specific measures to help those who are retrenched, as well as ways to better support self-employed people who have been affected by the novel coronavirus outbreak.

Commenting on the updated Advisory,?Koh Juan Kiat, Executive Director, SNEF, noted that the updated Advisory offered useful options for employers to cope with the current business downturn arising from COVID-19.? He said: "Businesses will differ in their operation and financial circumstances. As such they should evaluate the options and notify MOM after their adoption. This information will help the tripartite partners to better appreciate the ground and decide on further targeted support for employers and employees.?

Then Yee Thoong, Divisional Director of Labour Relations and Workplaces Division, MOM, added: "In sectors affected by COVID-19, tripartite partners recognise that businesses may need to implement cost-saving measures as they strive to keep afloat. I strongly encourage employers to study the Advisory, including the Annex of the Advisory that lays out the measures ordered in terms of severity of impact on employees? livelihood, and work with their unions and employees on a set of mutually agreeable measures. Working together, we will be able to save jobs and overcome the impact of COVID-19."

The updated tripartite advisory?reiterates that retrenchment is always the last resort.

Instead, employers should try these alternatives (arranged by severity of impact on employees' livelihood and work):

  • Send employees for training to upgrade their skills and employability.
  • Redeploy employees to alternative areas of work within the company.
  • Implement a flexible work schedule, flexible work arrangements, a shorter workweek, or temporary layoff.
  • Adjust wages in line with tripartite norms.
  • Implement no-pay leave.

In the event where retrenchment is inevitable, companies should implement retrenchment exercises in a responsible and sensitive manner bearing in mind the impact on the affected employees.

Here are the six key points to keep in mind when carrying out a retrenchment exercise:?

#1 Selection of employees for retrenchment should be conducted fairly

An objective criteria should be used, such as the ability of the employee to contribute to the company's future business needs. There should be no discrimination?against any particular group on grounds of?age, race, gender, religion, marital status and family responsibility, or disability. Employers should abide by the? Tripartite Guidelines on Fair Employment Practices. Complaints of discriminatory practices will be investigated and enforcement actions will be taken for substantiated complaints, such as curtailing work pass privileges of the employer.

#2 Notify the MOM and unions of the retrenchment exercise

If the company is unionised, the relevant union(s) should be consulted as early as possible, and at least one month before notifying the employee. Employers must comply with the Mandatory Retrenchment Notifications requirement under the Employment Act.

#3?Communication to employees:

Employers should communicate the intentions of retrenchment to their employees early and before the public notice of retrenchment is given. This may include:

  • Explaining the business situation faced by the company resulting in the need for a retrenchment exercise.
  • Outlining how the retrenchment exercise will be carried out.
  • Elaborating on the factors that will be considered.
  • Specifying the assistance being offered to those affected.

When issuing the retrenchment notice, employers should be sensitive to the emotional needs of affected employees. Where necessary, counselling support should be considered and offered.

#4 Retrenchment notice period to affected employees

Employers should provide a longer?notice period, to the extent practicable, to give the affected employees?time to prepare for and look for alternative arrangements. According to the Employment Act, the?following notice periods are a minimum requirement:

  • Less than 26 weeks in service: 1 day
  • 26 weeks to less than 2 years in service: 1 week
  • 2 years to less than 5 years in service: 2 weeks
  • 5 years and above in service: 4 weeks

However, the guideline encourages employers to adopt a longer retrenchment notice period when compared to the normal termination of an employment contract, or to pay in lieu of such notice. This should be worked out with the union(s) in the collective agreement concerned, with employees in their contracts of service, or codified in their company HR handbooks.

Employers should also pay all wages due and retrenchment benefit to the affected employees by the last day of work.

#5 Provide retrenchment benefit

Employees with?2 years? service or more are eligible for retrenchment benefit while those?with less than 2 years? service could be granted an ex-gratia payment.

The amount of retrenchment benefit depends on?what is provided for in the employment contract. If there is no provision, it needs to be negotiated between the employees?(via their union in the case of a unionised company) and the employer concerned.

The?prevailing norm is to pay a retrenchment benefit varying between 2 weeks to one month salary per year of service, depending on the financial position of the company and taking into consideration the industry norm.

However, in unionised companies where the amount of retrenchment benefit is stipulated in the collective agreement, the norm is one month?s salary for each year of service.

If the retrenchment exercise follows shortly after 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.

#6 Provide employment facilitation?

Employers are also encouraged to help affected employees find alternative jobs in associate companies, in other companies, or through?outplacement assistance programmes.

Employers are urged to?go beyond advisory assistance and make practicable efforts to place affected employees in their next jobs, possibly with the help of intermediaries such as employment/placement agencies.

Supporting documentation (such as referral letters, service records and past training certificates) should also be provided where relevant to facilitate the job search of affected employees.

To?provide employment facilitation services for?affected employees, employers can work with?the unions, SNEF and agencies such as WSG, NTUC?s Employment and Employability Institute (e2i), Job Security Council and U PME Centre.

Photo / 123RF

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