Retrenchment Benefits for Workers

Ms K Thanaletchimi asked the Minister for Manpower (a) how many companies have included retrenchment benefit clauses in their employment contracts; (b) which are the industries that do so and how prevalent is the practice; (c) what kind of assistance does the Ministry render to those retrenched without retrenchment benefits; and (d) whether the Ministry will consider imposing some baseline retrenchment benefits to help workers tide over the period before they get into another employment.

For workers who have served more than two years, payment of retrenchment benefits is mandatory if it is specified in their individual employment contracts or the collective agreements negotiated by their unions.

According to our survey on retrenchment benefits in 2015, it was not a widespread practice for employers to specify the quantum of retrenchment benefits in their employment contracts, except for the unionised sector where a majority of the collective agreements specify the quantum of retrenchment benefits. These establishments were mainly from manufacturing, construction and wholesale and retail trade. The same survey also found that around 90% of establishments which retrenched workers in 2015 paid retrenchment benefits to eligible workers.

The tripartite partners have deliberated extensively on whether to make retrenchment benefits mandatory and to specify the minimum quantum in the Employment Act. We have concluded that it may not necessarily be beneficial for both workers and businesses. A mandated level of minimum retrenchment benefit will likely become the norm and would not benefit the workers in cases where the employers are able to pay higher amounts. If we set the quantum too high, companies may not be able to afford it, especially when they are downsizing under difficult conditions. Further, overburdening companies will also have a negative impact on the remaining workers in the company as they strive to restructure and turn around the business. Instead, the tripartite partners issue guidelines which stipulate the prevailing norms for retrenchment benefits quantum. These norms can be updated from time to time.

The tripartite partners have also stepped up our support for all retrenched workers through the Adapt and Grow initiative, providing job matching and career services for them. In addition, since 1 January 2017, it has become mandatory for employers to notify the Ministry of Manpower (MOM) of retrenchments so that we can reach more retrenched workers and offer them timely assistance.