Can HR legally cut out employee benefits?

Retrenchment benefits may not be mandatory in Singapore, but they will help struggling workers through the recession

Can HR legally cut out employee benefits?

Can HR withdraw any employee benefits?

Retrenchment benefits have been in the limelight lately as employers figure out a way to manage both the business’s finances and its responsibility to workers during the COVID-19 recession.

At a parliament session, Singapore manpower minister Josephine Teo warned against disguising layoffs to avoid paying retrenchment benefits. She reminded employers that workers are entitled to the benefit as part of employment contracts or collective agreements.

Teo also made it clear that if an employer terminates a worker with no plan to fill the vacancy soon, the employee is considered retrenched and is thus entitled to the benefit.

In the event of a dispute, retrenched employees have a right to file a complaint with the Ministry of Manpower (MOM) and have their case assessed.

READ MORE: How to support retrenched employees

In an advisory, MOM added that there are currently a wide range of government support measures to help manage costs.

As such, even employers in severe financial difficulties should have some funds to provide the retrenchment benefit to affected employees, though the amount may vary depending on their financial position.

The company should thus aim to “renegotiate or moderate” the benefit with the affected employee or through labour unions. Retrenchment benefits are not mandatory in Singapore but are “strongly encouraged” by MOM as it will help tide workers through while they search for a new job.

Seek consent and communicate
When dealing with such scenarios, a leading employment lawyer reminded that consent is necessary if employers plan on making changes to an employment contract – this includes any written benefit terms.

“Contractual benefits given cannot be retracted or varied without the consent of the employee,” she told HRD. “However, if the benefits are discretionary, then the company has the liberty to reduce or even remove these benefits.”

READ MORE: MOM updates retrenchment guidelines amid COVID-19

Employees can sue the company, however, if the benefits are “a part of their contractual entitlements in their employment contract or if there is any subsequent promise to do so”. For example, if both parties had agreed on the terms of an employee’s retrenchment package.

“On its own, a company's past precedent of giving discretionary benefits is unlikely to be sufficient to prove that all employees are now contractually entitled to [it],” she said.

To avoid any possible legalities, she advised HR leaders to be proactive in letting employees know about changes made to benefit agreements – especially if they’re written in company documents.

“If such benefits are covered in any written policies or handbooks, the usual requirements would be for companies to notify the employees by way of circulating the updated policies/handbooks,” she said.

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