Responsible Retrenchment - New Singapore Guidelines for Companies Surrounding Reductions in Force ("RIFs").

These Revised Guidelines contain a significant number of new recommendations concerning reductions in force, as compared to the previous Tripartite Guidelines on Managing Excess Manpower (the "2009 Guidelines").

We highlight these new recommendations, and what they mean for employers, below.

1.Objective criteria in selection of employees for retrenchment

Where the 2009 Guidelines were silent on the selection process, the Revised Guidelines now state that selection of employees for retrenchment should be conducted fairly and based on "objective criteria" including the employee's ability to contribute to the company's future business needs. 

As the MOM may curtail employers' work pass privileges if complaints of discrimination are substantiated, employers should ensure that the selection process and its basis are founded on objective criteria and clearly documented, to guard against complaints.

2.Advance notification to TAFEP

In addition to the existing recommendations that employers notify the MOM of an impending retrenchment exercise and consult any recognised trade unions as early as possible, employers should also notify the Tripartite Alliance for Fair and Progressive Employment Practices ("TAFEP") of any impending retrenchment exercise.

Such notification is intended to enable TAFEP to help employers manage potential labour issues and also to assist affected employees to find alternative employment and/or undergo relevant training to upgrade their skills.

3.Detailed communications to employees

It is now not enough to simply inform employees of the retrenchment; the reduction in force communication to employees should include an explanation of the business situation, an outline of how the retrenchment exercise will be carried out, an elaboration of the factors that will be considered in the exercise, and the assistance that will be offered to affected employees.

4.Longer retrenchment notice period

The Revised Guidelines now encourage employers to adopt a longer retrenchment notice period than what was contractually agreed or the minimum under the Employment Act. Employers are also encouraged to pay in lieu of such longer notice period, and to work out these arrangements with any recognised trade unions, contractually with employees, or in company policies.

5.Computation of retrenchment benefits

The recommended quantum of 2 weeks to 1 month's salary per year of service remains unchanged from the 2009 Guidelines; the Revised Guidelines additionally recommend that if the retrenchment exercise follows shortly after a wage cut, the salary prior to the wage cut should be used to compute the retrenchment benefits. It is recommended that employers should not implement wage cuts prior to the reduction in force with the objective of reducing the quantum payable. 

6.Practical outplacement assistance

Outplacement assistance by employers now should go beyond advisory assistance to practical efforts to place affected employees in new jobs. Such efforts may include the provision of supporting documentation, or working with employment/placement agencies, unions, and SNEF.

Although the Revised Guidelines do not have the force of law, they set the expectations for employers in an RIF exercise. Implementing RIFs in Singapore is less straightforward than before; as the touchstone is "Responsible Retrenchment", an RIF exercise involves careful consideration and planning as companies' internal procedures and decisions are likely to be scrutinised by the tripartite partners moving forward.