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Retrenchment benefits law does not guarantee better outcomes for employees: Josephine Teo

Retrenchment benefits law does not guarantee better outcomes for employees: Josephine Teo

Manpower minister Josephine Teo speaking in Parliament on Tuesday (Oct 6).

SINGAPORE: Legislating retrenchment benefits does not guarantee better outcomes for employees who were laid off, Manpower Minister Josephine Teo said in Parliament on Monday (Oct 6). 

Responding to a question by Member of Parliament Louis Chua on whether a baseline retrenchment benefit can be legislated, Mrs Teo said that the suggestion is not new and has its drawbacks.

She argued that a legislated baseline would likely become the default, and so even when employers can afford to pay more, they would be unlikely to do so. 

"On the other hand, setting a high baseline retrenchment benefit would strain the financial health of businesses that are already struggling, and potentially jeopardise their survival and the jobs of the remaining employees," she said.

Mrs Teo added that employers would also be less likely to offer long term or permanent contracts, and resort more to hiring employees on short term contracts.

A more useful strategy would be to help retrenched workers find another job, the minister said. 

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

“Besides heavy subsidies for skills programmes, we provide substantial training and wage support to employers while their new hires undergo conversion programmes,” she added, pointing to schemes such as the Jobs Growth Incentive that provides salary subsidies for new local hires, and the SGUnited training programmes. 


A total of 11,350 people were retrenched in the first half of 2020 - past the 10,120 recorded during the SARS period but lower than other recessionary peaks - according to the latest labour market figures. 

READ: Retrenchments in Singapore spike in first half of the year, surpassing SARS peak: MOM

Firms that have businesses registered in Singapore, at least 10 employees, and which have notified at least five employees of their retrenchment within any six-month period are required to notify the Ministry of Manpower (MOM) of any retrenchment exercises.

Mrs Teo said this rule covers about 90 per cent of the workforce and is therefore “broadly representative”. 

Based on notifications received between April and September, about two-thirds of the employees who were cut had at least two years of service with their employers and were eligible for a retrenchment benefit, she said. 

About nine in 10 of them received some retrenchment benefit, of which about 84 per cent received at least two weeks’ salary per year of service, she added. 

Under the tripartite advisory on managing excess manpower and responsible retrenchment, companies should offer a retrenchment benefit of between two weeks’ to one month’s salary per year of service, depending on the financial position of the company and industry practices. 


Mrs Teo also answered MP Yip Hon Weng’s question on ageism and the number of Singaporeans aged 60 and above who lost their jobs or whose contracts were not renewed due to the COVID-19 downturn. 

She said this group of workers was retrenched at about the same rate as the general public.  

The incidence of local retrenchment was 4.9 per 1,000 local employees in the first half of 2020. Among workers aged 60 and above, the ratio was 5.2 for every 1,000 local employees. 

Employees on fixed-term contracts made up about 8 per cent of all employees in Singapore, and the number of contracts not renewed in the first half of the year is “stable” compared to the second half of 2019, she said, adding that the ministry does not have data on non-renewals of contracts by age groups. 

According to MOM’s second quarter labour market report released in September, 1,070 contract employees were retrenched in the first quarter of this year. That's more than the 470 in the second quarter of last year and 880 in the whole of 2019. These are contract workers who were terminated early due to redundancy.

As for the issue of ageism, Mrs Teo said that MOM recognises Mr Yip’s concern, especially amid a weak job market. 

READ: Harsher penalties for companies whose hiring practices discriminate against Singaporeans

Aside from monetary grants to encourage companies to hire seniors, Mrs Teo said Singapore’s employment laws protect employees against discriminatory employment practices, including wrongful dismissal on grounds of age. 

Penalties under the Fair Consideration Framework were also raised at the start of this year to create greater deterrence against all forms of workplace discrimination, she added. 

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Source: CNA/rp(gs)


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