Understanding your rights regarding retrenchment benefits in Singapore when your company ceases operations.
Are You Entitled to Retrenchment Benefits If Your Company Closes?
SINGAPORE — Workers in Singapore are not automatically entitled to retrenchment benefits unless explicitly stated in their employment agreements or in company policies.
According to Ms. Goh Seow Hui, a partner at Bird & Bird ATMD law firm, it is not illegal for employers to condition the retrenchment benefits on employees staying until the company’s closure. However, employees will only be entitled to such benefits if their employment contracts or company policies specifically mention them.
If an employee resigns before the company’s closure, they may not be entitled to severance pay, as retrenchment payments are typically triggered when the employer terminates the employment. Ms. Goh explains that while employees have the right to resign at any time, this action does not compel the employer to provide additional payments.
However, employees who are part of a union with a collective bargaining agreement may be entitled to retrenchment benefits, as specified by the agreement. Mr. Mohammed Reza, a partner at Simmons & Simmons law firm, points out that the specifics of the employer’s commitments to retrenchment payments play a key role in determining whether employees who resign before retrenchment can receive a payout.
The tripartite advisory on retrenchment encourages employers to pay retrenchment benefits of two weeks’ to one month’s salary for each year of service. However, this advisory is not legally binding and typically, retrenchment policies are outlined within company internal guidelines rather than in contracts.
While some employees may prefer to resign before the company shuts down, especially in a strong job market, others may stay on for job opportunities within other company branches. Employers, on the other hand, must consider staff morale, business stability, and their reputation when deciding whether to implement immediate or delayed retrenchments.
