Should retrenchment benefits be legislated?

The debate on mandatory payouts in Singapore has resurfaced amidst the recession

Should retrenchment benefits be legislated?

Should retrenchments benefits be made mandatory in Singapore?

The question around legislating retrenchment benefits is not new, Manpower Minister Josephine Teo said in parliament, and the topic has been debated. The answer remains the same: not anytime soon.

“The tripartite consensus, after extensive deliberation, is that it does not guarantee better outcomes for retrenched employees,” Teo said. “The legislated baseline would likely become the default. Even when employers can afford to pay more, they would be unlikely to do so.”

Read more: How to support retrenched employees

Additionally, if the minimum benefit is set too high, she said it could strain the financial health of businesses that are already struggling. What’s worse, it can “potentially jeopardise their viability” and eventually affect the jobs of remaining employees.

She believed that by legislating retrenchment benefits, employers would also be less likely to hire permanent or long term staffers, and resort more to hiring employees on short term contracts.

Regardless, the Ministry of Manpower (MOM) found that between April and September this year, about two-thirds of retrenched employees had at least two years of service, making them eligible for retrenchment benefits.

About nine in ten of these eligible employees received “some retrenchment benefit”, of which about 84% received at least two weekssalary per year of service.

“Even among employees who were not eligible, almost half received some retrenchment payout,” she said.

Read more: Can HR legally cut out employee benefits?

During her speech, she reiterated that retrenchments should only be a “last resort” and that the tripartite advisory recommends the industry standard of between two weeksto one months salary per year of service for payouts, depending on the financial position of the company and industry practices.

“While recognising the usefulness of retrenchment benefit and encouraging employers to pay according to prevailing norms, we are more focused on helping retrenched workers return to the workforce,” she said.

“Besides heavy subsidies for skills programmes, we provide substantial training and wage support to employers while their new hires undergo conversion programmes.”

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