Most S’pore firms still pay retrenchment benefits despite shortened service period

Amid softer economic conditions and ongoing business restructuring in Singapore, 15,580 workers were laid off in 2015 compared to 12,930 in 2014, according to a report released by the Manpower Research and Statistics Department, Ministry of Manpower.

In line with shorter employment tenures, the eligibility service period for retrenchment benefits was shortened from 3 years to 2 years and took effect on 1 April 2015. The Retrenchment Benefits Survey conducted once every 4 years was brought forward from 2017 to 2016 to cover retrenchments conducted in 2015.

The “Retrenchment Benefits 2015” report found that 9 in 10 establishments continued to pay retrenchment benefits to eligible employees, even after eligibility service period was shortened from 3 years to 2 years.

The proportion of establishments which paid retrenchment benefits to eligible employees remained high in 2015 (91%). Large establishments with at least 200 employees (97%) and unionised establishments (100%) were more likely to pay retrenchment benefits.

For employees who served less than 2 years and hence not eligible for retrenchment benefits, 2 in 3 establishments still paid retrenchment benefits to them.

The proportion of small establishments with 10 to 24 employees which paid retrenchment benefits was comparable to those with 25 to 199 employees.

For the first time, the survey was expanded to include small establishments with less than 25 employees (10 to 24 employees). The proportion of these small establishments which paid retrenchment benefits was as high as those with 25 to 199 employees (both at 88%).

Majority of establishments continued to pay 1 month of salary per year of service, although more were giving out lump sum payments.

A vast majority (83%) of establishments paid retrenchment benefits by years of service in 2015, with more than half paying 1 month of salary per year of service. Large and unionised establishments tended to pay higher retrenchment benefits.

The proportion of establishments which paid retrenchment benefits in lump sum increased in 2015 (17%, up from 7% in 2012). The lump sum quantum was typically 1 to 2 months of salary.

The proportion of establishments giving retrenchment benefits remained high.

From 1 January 2017, it will be mandatory for employers to notify MOM of retrenchment exercises within 5 working days1. This will enable Workforce Singapore (WSG) and its tripartite partners to better assist retrenched locals in finding alternative employment and relevant training.