Understanding the legal aspects of retrenchment benefits when your company is about to close.
Retrenchment Benefits: Are You Legally Entitled?
SINGAPORE — If your company is winding up, you may be wondering if you are entitled to retrenchment benefits. In Singapore, workers are not automatically entitled to such benefits unless they are explicitly stated in the employment contract or company policies.
According to Ms. Goh Seow Hui, a partner at Bird & Bird ATMD, it is not illegal for employers to link retrenchment benefits to staying on until the company fully ceases operations. However, retrenchment benefits must be clearly outlined in the employment agreement or company policies.
Employees who choose to resign before the company’s closure and retrenchment typically are not entitled to severance or retrenchment benefits. Ms. Goh explains that retrenchment payments are usually triggered by the employer’s termination of employment, not the employee’s resignation.
For unionized employees, however, there may be additional considerations. Mr. Mohammed Reza, a partner at Simmons & Simmons, notes that employees with a collective bargaining agreement may have more rights regarding retrenchment benefits.
The tripartite advisory encourages employers to pay retrenchment benefits ranging from two weeks to one month’s salary for each year of service. However, it is important to note that this advisory is non-binding, and companies may decide how to handle retrenchments based on internal policies.
The financial position of the company and the timing of the closure will influence the decision about retrenchment payouts. If the company’s closure is imminent and no other job prospects are available, employees may have fewer incentives to stay on until the end of operations.
Employers must also consider various factors, including staff morale, company reputation, and business stability when making decisions about when to implement retrenchments.
