Fewer firms paying retrenchment benefits: Survey

SINGAPORE — The soft economic conditions last year has taken its toll, with a smaller proportion of employers paying retrenchment benefits to workers they laid off.

The size of the payouts is also shrinking, according to a periodic survey by the Ministry of Manpower released on Thursday (Dec 29).

Just over nine in 10 companies (90.6 per cent) paid retrenchment benefits to eligible employees last year, down from 94.3 per cent during the last survey in 2012, making last year’s payout rate the lowest over the past decade.

This was as a shortened eligibility service period took effect in April last year. In line with shorter employment tenures, employees must now have served at least two years to be eligible for retrenchment benefits, as compared to three years previously.  

The Retrenchment Benefits Survey — which covered private sector establishments with at least 25 employees that laid off workers last year — attributed the dip in payout rate to non-unionised companies. 89.3 per cent of these companies paid retrenchment benefits — down from 93.2 per cent in 2012 — compared to 100 per cent of unionised companies. 

It also found that large businesses which house at least 200 employees were more likely to compensate retrenched workers (97.5 per cent) than smaller firms (88 per cent).

In terms of retrenchment packages, 52.3 per cent of companies compensated workers they laid off with a monthly salary for each year of service, down from 62.8 per cent in 2012. Instead, the proportion of bosses who opted for lump sum payments rose to 17 per cent, compared to 7 per cent in 2012.

Lump sum payouts usually range between one to two months of salary, regardless of how long the employee has been with the company. Again, unionised companies and large establishments were more likely to peg retrenchment benefits to an employee’s years of service.

A total of 15,580 workers were laid off last year, a 20.5 per cent increase from 12,930 in 2014.

The number this year is projected to be even higher. In the first nine months of the year, the number of layoffs reached 13,730, the highest since the global financial crisis some seven years ago. 

Commenting on the fall in companies paying retrenchment benefits, National Trades Union Congress assistant secretary-general Patrick Tay urged workers to ensure that retrenchment benefits are spelt out in their contracts before signing them.

The new Employment Claims Tribunal, which will hear salary-related disputes when it is set up next April, will offer another recourse, but only if employment contracts clearly state what form of benefits workers are entitled to in the event of retrenchment.

Mr Tay also urged workers in non-unionised firms to be part of a union so that they can seek help through the tripartite mediation framework.

He added that retrenchment figures could rise when mandatory reporting regulations set in next year.

From January, all companies — with the exception of micro enterprises — must notify the MOM of any retrenchment exercises within five working days of informing the affected employees.

“In the year ahead, might see consolidation, though not across the board, in some industries like oil and gas, offshore and marine…But we don’t expect retrenchments to sharply increase or decrease unless something happens externally,” he said.

CORRECTION: An earlier version of this report said retrenched workers getting zero or smaller payouts last year ticks up. It should be retrenching establishments giving zero or smaller payouts ticks up as the survey results were based on retrenching establishments.Also, the percentage of smaller firms that were more likely to compensate laid off workers should be 88 per cent, not 87 per cent as reported earlier. We are sorry for the errors.