Disguised retrenchment is 'not progressive'

More cases of disguised retrenchments - workers getting laid off without their employers treating it as a retrenchment to avoid paying a fair package - are surfacing.

There has been an increase in disguised retrenchment cases, said NTUC assistant secretary-general Patrick Tay, who is also the director of NTUC Legal Services and its PME (professionals, managers, executives) unit.

About 15 to 20 people have approached the NTUC's U PME Centre for help, compared to fewer than 10 in 2015.

In disguised retrenchment, a company avoids treating the layoff as a retrenchment so as not to pay fair benefits.

Mr Tay told The New Paper on Wednesday that cases of irresponsible retrenchments are not rampant. But they remain a concern because companies are carrying out such practices without breaking the law. 

For example, some workers are terminated with a month's notice - allowed under provisions in employment contracts - and do not get retrenchment benefits.

He said: "The employee might be working for them for 15, 20 years, then they are told, 'You don't have to come back any more.' "Legally, the employer may have the right to do that because the employment contract doesn't have any severance package but this is not progressive."

Nine in 10 companies paid retrenchment benefits, according to the last survey in 2013 on retrenchment carried out in the previous year.

It showed that the prevailing norm was to pay a retrenchment benefit of between two weeks' and one month's salary per year of service, Manpower Minister Lim Swee Say told Parliament in September.

In May, tripartite guidelines on managing excess manpower and responsible retrenchment were issued by the Ministry of Manpower (MOM), the Singapore National Employers Federation and NTUC. They highlighted the measures that companies are supposed to take during a retrenchment exercise, such as giving ample notice to affected employees and paying them benefits.

Mr Tay thinks irresponsible retrenchments could happen to employees across all industries and age groups.

He said: "It affects firms that are facing challenges and need to fire people. If (disguised retrenchments) are legal, it doesn't matter if you are old or young."

There are tell-tale signs when a company is trying to get rid of employees to reduce costs, Mr Tay added.

For instance, workers who have been doing the same job are suddenly given poor performance ratings when they had previously received consistently good ratings. Another sign is when a company's order books are empty.

Mr Tay urged companies to inform MOM and the Tripartite Alliance for Fair and Progressive Employment Practice of any impending retrenchment exercise so that affected employees can get help finding another job.

According to the tripartite guidelines on retrenchment, the relevant union is supposed to be consulted as early as possible if the company is unionised.

Where it is provided in the collective agreement, the norm is one month before notifying the employee.

Mr Tay said: "We want to know early so that we can help workers who are affected as best as we can. We want to help them with a seamless transition to another employer.

"We can also negotiate the retrenchment payout which might not be prescribed in the collective agreement."

In September, Labour NMP K. Thanaletchimi asked in Parliament whether it could be made compulsory for companies to notify MOM about any retrenchment exercise.

Mr Tay said the matter is currently being discussed with MOM and there will be an announcement in the coming months.

Asked if compulsory notifications could lead to more disguised retrenchments, he thinks that would be unlikely but he called on companies to conduct retrenchment exercises in a "fair, responsible and progressive" manner.

"There is more to lose for the employer if word goes around and employees still with the company will give them a dirty look. It affects morale and productivity."

He added that the employer's reputation could suffer, especially if the "retrenched" employees go to the media or use social media to reveal how the employer had treated them.

Firms carry out disguised retrenchment to avoid payout

Disguised retrenchments happen when companies seek to avoid paying retrenchment benefits or have reputational concerns, said lawyer Ian Lim.

Mr Lim, who heads TSMP Law's employment and labour team, said employees in industries more affected by the economic slowdown, such as oil and gas, could be more prone to disguised retrenchments.

"Employees could also be more susceptible to disguised retrenchments when they have individual contractual entitlements to retrenchment benefits, but are not from a unionised company and are not union members," he said.

Nonetheless, employers would seek to comply with the tripartite guidelines when it comes to retrenchments, said lawyer Jenny Tsin, joint head of employment practice at Wong Partnership.

"On the whole, companies do their best to be good corporate citizens," she said.

"As long as the termination is done in accordance with the provisions of the contract, it would on balance be difficult for any employee to successfully bring a claim in respect of the termination unless there are other factors in play, for instance a breach of some implied term of mutual trust and confidence."

Singapore Human Resources Institute president Erman Tan thinks disguised retrenchments are rare because of tripartite agreements.

But if it happens, there are options for employees to seek recourse, such as the Employment Claims Tribunal, which will start hearing salary-related disputes next April, he said.

It will cover all workers including those who do not come under the Employment Act - professionals, managers and executives earning more than $4,500 a month, who would otherwise have to file claims with the civil courts.


Mr Tan also called for retrenchments to be carried out with empathy and respect.

"I have heard of employees being escorted out by a security guard or workers who were logged out of their e-mail accounts," he said.

Mr Tan added that given the current economic situation, retrenchments may be unavoidable, but should be used as a last resort.

"It is important to prioritise the welfare of the staff. This means making them feel appreciated and giving them a fair compensation."

Retrenchment notice and benefits

Under the Employment Act, employers are supposed to inform their workers before they are retrenched.

There is minimum requirement, ranging from one day's notice for employees who have worked less than 26 weeks to four weeks' notice for those who have worked for at least five years.

Employees who have worked for at least two years are also eligible for retrenchment benefits.

It depends on the collective agreement or contract of service, but the prevailing norm is a payout of between two weeks' to one month's salary per year of service.

In unionised companies, where the quantum of retrenchment benefit is in the collective agreement, the norm is one month's salary for each year of service.

Disguised retrenchments mean companies terminate employees without taking the necessary responsibilities.

NTUC assistant secretary-general Patrick Tay outlined more scenarios:

Workers axed by firms and given a one-off or ex-gratia payment, some of which are below industry norms.

Contract workers terminated due to loss of business contracts.

Contract workers have their contracts discontinued after their firms fail to retain business deals or have to shed staff on account of a slowdown. While legally permissible, this could be considered a layoff.

Workers asked to resign voluntarily. The companies tell them that being terminated "doesn't look good " on their resumes.


4,100: The number of workers who lost their jobs in the third quarter of this year.

13,610: Redundancies (consisting of retrenchments and workers under contracts) so far this year.

15,580: Redundancies last year.


For assistance on employment facilitation, companies can contact:

Singapore Workforce Development Agency

URL: www.wda.gov.sg Tel: 6883 5885 Feedback: portal.wda.gov.sg/feedback

Employment and Employability Institute

URL: www.e2i.com.sg Tel: 6474 0606 E-mail: followup@e2i.com.sg

Employees who encounter irresponsible retrenchment practices not in compliance with the Employment Act can approach the Ministry Of Manpower for help.

Those not covered by the Act can approach their unions.

Non-union members whose contract stipulates a notice period or the retrenchment benefits quantum can seek recourse through the Civil Courts.


This article was first published on November 04, 2016.
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