Retrenchment Payout: Check the Eligibility and Amount!

The employment contract or, in the case of unionized enterprises, the collective agreement determines the monetary value of retrenchment benefits. For every year of service, you will typically receive a pay of between two weeks and one month, depending on the industry and the company’s financial situation. 

Retrenchment Payout

The employment contract or, in the case of unionized enterprises, the collective agreement determines the sum of retrenchment benefits. 

For every year of service, you will typically receive a pay of between two weeks and one month, depending on what industry you work in and the financial state of the business.

One month’s compensation is typically awarded for every year of service in unionized companies. Retrenchment benefits are provided without the need for CPF contributions from the employer or the employee.

What are the eligibility criteria for retrenchment payout in Singapore?

Employees receive retrenchment benefits to make up for their loss of jobs. Employees who have worked for the organization for two years or longer are qualified for retrenchment benefits; those who have worked for less time may be entitled to an ex-gratia payment as a gesture of goodwill.

What are the legal requirements for retrenchment in Singapore?

When it comes to retrenchment in Singapore, employers have certain obligations to consider.

Selection of Employees for Retrenchment:

• Employers should base the selection on objective criteria and conduct it fairly.
• Factors include the employee’s ability to contribute to the company’s future business needs, with no discrimination based on age, race, gender, religion, marital status, family responsibility, or disability.
• Employees’ entitlements (such as maternity leave) should not be deprived, and no punishment should occur for exercising employee rights.

Prior Notification:

• Employers are encouraged to inform the Ministry of Manpower (MOM) before retrenchment.
• Unionized companies should consult with the union.
• Early communication with affected employees is essential, describing the economic situation and assistance offered.

Notice Period:

• Employers must give notice as stipulated in the employment contract or the Employment Act (if applicable).
• Retrenchment benefit is given to employees who have served the company for at least 2 years; those with less than 2 years may receive an ex-gratia payment.

Amount of money received from Retrenchment 

The provisions of the contract of employment or collective bargaining agreement (for unionized enterprises) determine the monetary value of retrenchment benefit. If none exists, the terms will be worked up by the company and employees (or their union).

Retrenchment benefits typically range from two weeks to one month’s income for every year of service, based on the industry and the organization’s financial standing.

One month’s salary is typically awarded for every year of service in unionized workplaces where the collective agreement specifies the sum of retrenchment benefits.

The sum of compensation should be based on the salary prior to the pay cut if the retrenchment occurs soon after it.

For the retrenchment benefit, neither the company nor the employee must make CPF payments.

How can I calculate the retrenchment benefit amount?

The amount of retrenchment benefits in Singapore depends on several factors. Here’s how it’s typically calculated:

Service Duration:

• Employees with less than two years of service receive 10 days’ wages for every year of employment.
• Those with two years or more but less than five years get 15 days’ wages per year of service.
• For employees with five years or more, the benefit is 20 days’ wages per year of employment.

Industry Norm:

• Retrenchment benefits ranging from two weeks to one month’s salary are often paid after one year of service.
• In unionized companies, where the amount is stated in the collective agreement, the norm is 1 month’s salary for each year of service.

It’s very important to review your employment contract and understand the terms clearly before accepting any retrenchment package. 

What are the factors that must be considered before Retrenchment? 

The following actions should be taken by employers before implementing layoffs:

• Consider your labor requirements in the long run, taking into account the necessity of keeping a solid Singaporean core.

• Before initiating any layoff exercise, notify MOM.
• If your company has a unionized workforce, speak with the union.

• Don’t treat employees or groups of employees unfairly; instead, base your decision on things like their potential to support the ongoing demands of your organization.
• Give your impacted staff members respect and decency.
• Give all impacted employees more notice before implementing a retrenchment.

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