With the recent rave about Ofo’s employees being terminated with ”immediate effect” last week, some concerned working individuals may be wondering what MOM’s stand is on retrenchment practices.

According to a news article dated 2nd February 2019 by Channel News Asia, former employees from bike-sharing company Ofo, who had their contracts terminated in late January 2019, said that the firm’s operations have “practically ceased” in Singapore as all employees were made redundant. These ex-employees said that Ofo terminated around 10 members of staff from the operations division on Thursday (Jan 31), and there were no employees left to move or maintain its fleet of bicycles on the streets.

Another former employee who was also let go last Thursday after working for more than a year said he was surprised by how the company did not offer him and his colleagues the one-month compensation they were due based on the terms of their employment contract. However, he did not pursue Ofo’s management for it as their salaries for the month of January may be withheld if they raised any objections.

Notice of retrenchment
According to MOM guidelines, companies should give a longer notice period for their employees wherever possible as these affected employees will need time to prepare and look for new jobs.

The notice period depends on what is stipulated in the contract of service. If the notice period is not stated, as a minimum requirement, the following applies:

Length of service

Notice Period

Less than 26 weeks

1 day

26 weeks to less than 2 years

1 week

2 years to less than 5 years

2 weeks

5 years and above

4 weeks

Source: https://www.mom.gov.sg/employment-practices/retrenchment/responsible-retrenchment

Retrenchment benefits
Retrenchment benefits are payments given to employees to compensate them for the loss of employment.

Who is eligible

According to MOM guidelines, employees who have served the company for at least 2 years are eligible for retrenchment benefits. Those with less than 2 years’ service could be granted an ex-gratia payment out of goodwill.

Amount of compensation
The amount of retrenchment benefit depends on what is provided for in the employment contract or collective agreement (for unionised companies). If there is no provision, it will have to be negotiated between the employees (or their union) and the employer.

The prevailing norm is to pay a retrenchment benefit of between 2 weeks to 1 month salary per year of service, depending on the company’s financial position and the industry.

In unionised companies where the amount of retrenchment benefit is stated in the collective agreement, the norm is 1 month’s salary for each year of service.

Retrenchment considerations for Employers
If you plan to retrench your staff, you should do the following before you retrench:

  • Take a long term view of your manpower needs, including the need to maintain a strong Singaporean core.
  • Inform MOM before carrying out any retrenchment exercise.
  • Consult with the union if your company is unionised.
  • Not discriminate against employees or groups of employees and make your selection based on factors such as the ability to contribute to your company’s future business needs.
  • Treat your affected employees with dignity and respect.
  • Consider having a longer retrenchment notice period for all your affected employees.

During the retrenchment exercise, you should:

  • Pay all salaries, including unused annual leave, notice pay, etc., to your employees on their last day of work.
  • Help your affected employees look for alternative jobs in associate companies, other companies or through outplacement assistance programmes, e.g. job fairs, career fairs, career advice.

Retrenchment is not the only way to reduce excess manpower, there are alternatives you can consider.

Retrenchment considerations for affected Employees

  1. Accept your current situation and be open to discuss this with your immediate family.
  2. Be open to learning new skills that can add value to your wealth of experience
  3. Work through your finances carefully
  4. Update and send out your CVs; talk to a Career Coach if necessary
  5. Stay engaged with peers in the industry to stay abreast of any changes or job opportunities

If you are an employee affected by the retrenchment exercise, don’t despair. When one door closes, another will open. With a positive mindset, you will eventually find your way out of your dire situation.