A Responsible Retrenchment - What can a company do for its employees when it has to let go
A Responsible Retrenchment - What can a company do for its employees when it has to let go

Posted on 18 August 2020

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The Covid-19 pandemic has severely affected the labour market, with the overall unemployment rate rising to 2.9% last month after taking into account seasonal variations - the highest in just over a decade, and up from 2.4% in March. Several large retrenchment exercises have also made the news, with companies like Resorts World Sentosa, Grab and Zilingo laying off staff.

In these times, a company must make the difficult decision to conduct retrenchments. Under such circumstances, it must ensure that the process is conducted responsibly and thoughtfully, with empathy for the situation of all affected.

Here are some must-dos for a company to make this difficult decision smoother:

  1. Open communication

Retrenchment is difficult for both an employer and employees, so it is important to keep communication open to avoid mistakes or misunderstandings. The company should formulate a communication plan for the retrenchment exercise, which outlines the business rationale for retrenchment and measures taken previously to mitigate it, how the exercise will occur, and whatever information the company can share about the basis for retrenchment.

Keeping an open communication line is integral, to listen to employees and allay whatever concerns they have. The company should also have plans in place to provide assistance for any affected even after they have left.

  1. Inform affected workers face-to-face

Show respect and empathy for your employees by informing those that are affected face-to-face, rather than through a conference call or mass email. This meeting should include the HR staff and the employee’s manager so that they can quickly address any concerns the employee might have. Most importantly, the company representatives should emphasise that the retrenchment is not a reflection of employee performance, and provide an avenue for further communication.

  1. Provide assistance in job-seeking for affected employees

At minimum, a company should provide affected employees with all the relevant information needed in their job hunt. These include referral letters, payslips, training certificates or other documents.

Companies should work with the unions, SNEF and agencies such as WSG, NTUC’s Employment and Employability Institute (e2i), Job Security Council and U PME Centre, to help affected employees search for new positions. They can also network within their industry to find similar jobs for their staff in other companies, and/or engage career coaching or upskilling services.

  1. Provide adequate severance packages

According to Ministry of Manpower (MOM), all employees who have been with the company for at least 2 years are eligible for severance pay. This amount varies, but typically is between 2 weeks to 1 month’s salary for each year of service. Additionally, employees with less than 2 years' service could be granted an ex-gratia payment out of goodwill.

However, for companies experiencing a financial pinch, there are other ways of supporting affected employees. Grab, for example, allowed staff to keep their laptops so that they could begin their job search. Other companies have allowed investing in stock options, or paid medical insurance for a period.

  1. Notify the relevant agencies

Companies thinking of retrenchment should first consider other options available such as part-time work arrangements or pro-rated salary. They should also submit an early alert to MOM to gain access to information on government schemes and subsidies.

But, in the case that the company feels retrenchment is unavoidable, MOM states that it is compulsory for companies with at least 10 employees who have retrenched 5 or more employees within any 6-month period to notify them. However, the best practice is to inform MOM of any retrenchment exercise as early as possible.

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