Retrenchment: Employers should reassess business situation

Be fair to employees, urges Singapore's National Wages Council

Retrenchment: Employers should reassess business situation

Employers in Singapore should continue to minimise retrenchments, focus on transforming the business and treat employees fairly, said the National Wages Council (NWC). The council said existing retrenchment guidelines “remain relevant” in 2021. However, as many sectors and the economy are on the way to recovery, employers must re-evaluate their business situation and adjust their strategy accordingly.

“Employers experiencing recovery or growth should take steps to restore wages, reward employees fairly, and bring forward hiring plans,” they wrote in a statement. Additionally, business circumstances may have changed significantly compared to 2020, so employers should aim to save as many jobs as possible and recognise employee contributions fairly.

“To facilitate wage negotiation, employers of unionised companies should share relevant information, such as company performance and business prospects, with unions,” they said.

Read more: Retrenchment checklist: 10 ways to keep it a 'fair' exercise

The NWC released the following guidelines for employers:

  • For firms who have done well and have good business prospects: Continue to reward employees fairly through bonuses and focus on hiring staff. You should also consider pay increments for staff.
  • For those experiencing business recovery: Restore wage cuts or roll back on cost-saving measures like shorter work weeks or furloughs. Aim to restore employees’ basic pay first, followed by additional payments like commissions or bonuses.
  • If the business continues to be hard hit: Take full advantage of government support measures to restructure the business and retain staff through appropriate cost-saving measures. Aim to retrain and redeploy employees in affected business units if possible.
  • Give special consideration to low-wage workers: Consider pay increments for this group if you can. If the business is still struggling, implement a wage freeze for low-wage workers instead of retrenching staff.

Read more: How to calculate retrenchment benefits

“If employers have already exhausted non-wage cost-saving measures and government support and still face significant cost pressures and poor business prospects, these employers should seek employees’ support to implement temporary wage cuts to minimise retrenchments,” they wrote. Work with employee unions as much as possible before implementing any changes to employee pay or work arrangements.

“The uncertainty and unevenness of recovery has translated into uncertain prospects for some businesses,” they said. “The NWC recognises that businesses may continue to face increased COVID-19 related costs.”

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