Retrenchment in Singapore: What employers need to get right

As retrenchment exercises face closer scrutiny from regulators, unions, and the public, Celeste Ang, Principal, Employment and Dispute Resolution at Baker McKenzie Wong & Leow, outlines the practical steps employers should take to reduce legal, regulatory, and reputational risk.

Workforce restructuring and retrenchments in Singapore are no longer viewed as routine commercial exercises, and decisions are increasingly subject to scrutiny by the authorities and regulators, unions and the public.

While Singapore labour and employment laws do not provide for statutory redundancy or severance benefits or payments, there is nevertheless presently some level of attention and scrutiny by the Tripartite Partners, which consist of the Ministry of Manpower (MOM), the National Trades Union Congress (NTUC), and the Singapore National Employers Federation (SNEF), as to how organisations are managing retrenchment exercises.

In Singapore, the legal risk of retrenchment no longer lies primarily in whether employers can lawfully let employees go, but in whether their decision-making processes can withstand scrutiny from the relevant stakeholders after the fact.

Retrenchments and retrenchment exercises are monitored by the MOM. In Singapore, employers with at least 10 employees are legally obliged to notify the MOM within five working days after notifying the employee of his/her retrenchment to also enable the Tripartite Partners and other agencies to assist those affected.

The Tripartite Partners have published a Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (updated 20 January 2023) (the "Advisory"), which provides employers with best practice guidelines to handle retrenchments responsibly, fairly, and sensitively. Salient points of the Advisory include the following:

• Objective selection criteria: Employers should select employee(s) to be retrenched based on objective criteria and apply such criteria consistently and not discriminate, taking a long-term view of manpower needs including the need to maintain a strong Singaporean core,
• Clear communication and notification: Employers should, as much as this is possible, communicate early to the affected employees, the efforts to manage business challenges and the intent to retrench, before public notice, and communicate sensitively,
• Support for affected employees in terms of retrenchment benefits and job support,
• Retrenchment payment: There is no statutory obligation to offer a retrenchment payment, although contractual obligations and collective agreements (for companies who have employees who are subject of collective agreements with unions) must be honoured. Where no such obligation exists, the prevailing norm is two weeks to one month salary per year of service, depending on the financial position of the company and industry norms.

Although the Advisory does not (presently) have force of law, employers underestimate how gaps in fairness, consistency, and documentation can still trigger scrutiny and disputes.

Non-compliance or a failure to consider these guidelines may increase the likelihood of inquiry and investigation by the authorities into the employer's practices. Nowadays, employees have heightened awareness of their rights and will engage the authorities or unions or engage in public social media escalations. The unions in Singapore have also been paying close attention to these exercises and intervening or voicing their concerns as necessary.

As fairness is a consistent theme in the Advisory, organisations should also consider the Tripartite Guidelines on Fair Employment Practices (TGFEP) overseen by the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) set up by the Tripartite Partners. Like the Advisory, the TGFEP does not have force of law per se (at this time).

However, TAFEP will look into cases of workplace discrimination, including discrimination in the execution of retrenchment exercises, and escalate as appropriate to MOM for inquiry/investigation.

Notably, workplace discrimination, including, amongst others, some of guidelines and principles in the TAFEP will have the force of law imminently by way of the Workplace Fairness Act 2025 (WFA). The WFA was passed in two parts in 2025 with full implementation expected in or around 2027, on dates to be notified by the Singapore Government. It is Singapore’s first comprehensive statutory framework, prohibiting workplace discrimination on specified characteristics, with potential administrative penalties, criminal liability and civil remedies for prospective and affected employees.

For HR teams, the challenge today is not simply aligning retrenchment exercises with MOM expectations but building processes that are disciplined enough to withstand claims of unfair dismissal or discrimination.

"In Singapore’s increasingly contested employment landscape, retrenchment risk is no longer shaped by cost exposure alone, but is defined by process, perception and preparedness."

To properly manage retrenchment processes and exercises and mitigate risks, organisations should consider the following:

1. Review existing processes and policies against the guidelines in the Advisory and TGFEP and the provisions of the WFA, and update if necessary,
2. Plan each retrenchment exercise in advance, considering the notification and other consultation requirements.
   1. Have an objective criteria for selection, free of discrimination.
   2. Have a comprehensive and clear communication plan (including a communication protocol to address any inquiry from the public, the authorities and/or the unions).
   3. Depending on impact of the exercise, consider engaging MOM in advance; consult with the unions (if applicable and necessary).
3. Approach exercises sensitively; conduct training for HR and managers who are implementing.
4. Consciously keep written records of decisions made and communications.

READ MORE: Workers are holding on to their jobs while layoff pressures persist: Is ‘job hugging’ the new threat to HR? 

Lead image / Provided