Why does Singapore not have a mandatory retrenchment benefits scheme?

Why does Singapore not have a mandatory retrenchment benefits scheme?

Reader Gabriel Tham wrote in to askST: "Why does Singapore not have a mandatory retrenchment benefits scheme?

"First, it will make employers weigh the cost of retrenchment in the short term.

"Second, it will make employers think twice about over-hiring and then abusing the system."

Manpower correspondent Toh Yong Chuan answered:

This issue crops up from time to time, especially during economic slowdowns when retrenchments rise.

The government has always rejected suggestions of making it mandatory for companies to pay retrenchment benefits to workers who are laid off.

It has always maintained that it is not necessary for such payments to be made mandatory because the practice is already widespread.

According to its own surveys, as many as nine in 10 companies who retrenched workers paid such benefits. It would rather give companies and unions the flexibility to negotiate such payments, rather than prescribing it under the law, because the circumstances of companies that retrenched workers are different and there cannot be a one-size-fits-all approach.

This approach is consistent with the longstanding view by the government that if labour laws are rigid, such as making retrenchment payments compulsory, companies will be deterred from hiring workers on the onset and workers will be hurt.

The furthest that the government would go, for now, is to make it compulsory for companies to report to the Ministry of Manpower within five working days of laying off workers. The new rule, which kicks in from Jan 1, will make sure that retrenched workers get timely help, the government said when it announced the new rule last month.

The pressure on the government to make retrenchment payments compulsory will continue to increase. As workers become more educated, they will want to see their rights protected. The government will have to balance the desire for more protection by workers against the flexibility that it gives companies in hiring and firing.


This article was first published on December 5, 2016.
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