Employment Relations - Asia

1. Introduction

When a company faces financial difficulties, one thing they will look at is to cut cost. With cost of salary having a substantial percentage of the total cost structure, it is of little wonder when management put their focus on reducing headcounts. And if situation doesn’t get better, company may choose to close down plants to prevent further losses.

In both situations, employer will face the difficulties to inform affected employees of the decision. When companies decide to let go of staffs, there are several issues to deal with care such as negotiation of retrenchment packages, helping affected employees to source for suitable position in other companies etc.

2. Retrenchment in Singapore

Accordingly to Employment Act in Singapore, if employer feels that employee is not needed or there is reorganization in the company, they have the right to carry out retrenchment exercise without having the need to provide any reason.

The Act also state that if affected employees have work less than 3 years with the company, they are not entitles to any retrenchment benefits. But in accordance with the Court of Appeal, this does not imply that benefits much be given if employees have worked more than 3 years.

We will look at how different each roles deal with plant closing and retrenchment in Singapore.

3. Role of Employer

Under the Employment Act in Singapore, there is no specified requirements of the employer in regards to the notice period that is given to employees should retrenchment arises. However, Singapore National Employers Federation (SNEF) and Ministry of Manpower (MOM) have encouraged companies to inform affected employees as early as possible.

In Feb 2012, over 22 companies have voluntarily informed the government of the possible retrenchment later in the year that could affect about 230 employees. This allows the government to liaise with relevant bodies such as Employment and Employability Institute and Workforce Development Agency (WDA) to help affected employees source for future employment.

As mentioned, there is no law binding on the employer that retrenchment benefits have to be given. Hence, any benefits given to employees in this situation are out of goodwill unless a collective agreement has been signed prior to that.

And during a plant closure, bigger organization may source for suitable vacancies for affected employees in other subsidiary or plant. For example in 2009 when Seagate closes its hard disk drive facility with 4,000 employees in Singapore, the management did a restructuring and half of the employees were transferred to other plant.

As organization’s