Top employment lawyer: Retrenchment benefits are not actually guaranteed by law in Singapore

**SPEAKER_1** (0:02)
This is a podcast by The Straits Times.

**Lynda Hong** (0:10)
Hello, I'm Lynda Hong, Assistant Podcast Editor for The Straits Times. In this episode of In Your Opinion, I'm joined by a lawyer with over two decades of employment law.
Jonathan Yuen, partner from Rajah & Tann, welcome to the show.

**Jonathan Yuen** (0:25)
Hi, thanks for having me.

**Lynda Hong** (0:26)
Now Jonathan, we're going to talk about how the upcoming Workplace Fairness Act will change the rules of the game for everyday workers who are currently facing disguised retrenchments. Let's start with the basics so everyone is on the same page. A regular retrenchment is defined as a dismissal on the grounds of reorganizing the company, such that the employee's role becomes redundant and the position will no longer be filled. This covers permanent employees and even contract workers with full contract terms of at least six months.
But a disguised retrenchment is a staff member is laid off, but the employer deliberately misclassifies the dismissal to avoid paying severance packages. Now, how can employees tell if they will let go under the guise of retrenchment?

**Jonathan Yuen** (1:14)
Right. Okay, Lynda. So that's a mouthful. And let's kind of peel the onion slowly. Let's start off first with I think definitions, which I think are very important. So a standard retrenchment exercise occurs when businesses recalibrate, reorganize, and that's quite normal in a fast-paced business world. And this generally happens when especially MNCs, they move offices from, let's say, Singapore, they move it to Hong Kong or Vietnam or manufacturing companies, they do that. And suddenly a line of a production line that existed in Singapore for 20 years has been shifted to Vietnam or Batam or a lower-cost area, and all these factory workers no longer have a job. Similarly, when a regional office decides, for example, to move, let's say, its entire regional office, let's say, for cost concerns out of Singapore, and to locate it in Bangkok or Kuala Lumpur, then all the people that had regional roles will no longer have that. And that's the classic definition of restructuring or reorganization. Now, in these scenarios, most companies are, and especially MNCs, are already aware of their obligations.
And most of them will have contractual benefits for their employees to pay some measure of retrenchment benefit to them, calibrated according to their companies' norms. I would say American, European companies tend to have these enshrined in contract. The problem happens, and I think the root of the issue here today is that for companies that don't have such contractual protections, what is the general state of the law in relation to what retrenchment protections workers get when the company suddenly says, okay, so and so you have been retrenched?
And that is a, I would say, a very traumatic time for the employee. You know, they're like, is it my performance? Is it the role? And I think this issue of disguised retrenchment, and that's where the conversation is leading to, pops up because people want to understand why. And if you say that there is a retrenchment, then why am I not getting something? And there is this expectation. So I think we will talk a lot more about expectations vs. reality.
And I will just kind of preface this by saying that it's a bit of a sobering reality for under Singapore law because, and I'll just come out and say it first, retrenchment benefits are not legally mandated by law. The MLM has come out to say it. In a recent court case at the Employment Claims Tribunal, ECT 3, the court has also made clear that, you know, retrenchment benefits are not legally enshrined in the Employment Act. So it has to be in your contract. And there's no stand-alone, cover-all kind of magical retrenchment benefits that are payable. So a lot of times when people kind of toss around things like, oh, if you've been retrenched, if you've been retrenched, you know, you ought to get two weeks to four weeks for every year that you've worked with the company.
What these people are referring to in such conversations, are MOM customary norms that the MOM suggests. So the word is suggests, and I always very cheekily say that a MOM can strongly suggest, like an Asian parent strongly suggests. But at the end of the day, if the company says no, we're not going to do so, it doesn't create an independent legal right for the employee to then go and sue the company in court and say, well, I've worked for you for four years, where's my four months retrenchment benefit? Because I'm entitled at law to it. And the short answer is that no, you are not entitled at law to a standalone retrenchment benefit. And I think that is the crux of the issue here today.