As businesses respond to changing market demands and digital transformation, restructuring has become more common. For some employees, this has led to the challenging experience of retrenchment.
If you’re facing retrenchment, it’s natural to have many questions: Why did this happen? What am I entitled to? Do I still need to serve my notice period? Understanding your rights during this time can give you the clarity and confidence to move forward.
What is a retrenchment letter?
A retrenchment letter formally notifies you that your position is being made redundant. It includes essential information such as your last day of work and the components of your compensation package.
This letter can also be helpful for future job applications, claims for government support, or resolving any post-employment queries, such as confidentiality obligations or non-compete clauses.
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How is retrenchment compensation calculated in Singapore?
Under Singapore’s Ministry of Manpower (MOM) guidelines, employees who have served at least two years are typically eligible for retrenchment benefits. While there’s no mandated sum, the payout should follow what’s stated in your employment contract or what’s mutually agreed during the announcement.
According to MOM’s guidelines, most employers offer between two weeks and one month of salary for every year of service. A typical retrenchment package includes:
- Salary up to your last day
- Payment for unused annual leave
- Retrenchment benefit based on tenure
- Pro-rated bonuses or AWS
- Any other contractual payments
Example:
- Monthly salary: $8,000
- Years of service: 5
- Unused leave: 10 days
- Retrenchment benefit: $40,000 (one month per year)
- Leave encashment: $3,692.30
- Final payout: Approximately $51,692.30
What happens to your notice period after retrenchment?
A common concern is whether employees must continue working during their notice period after being retrenched. While there’s no legal obligation, companies may offer different options.
1. Payment in lieu of notice
Most employers in Singapore offer compensation instead of requiring employees to serve their notice. This approach allows for a quicker and smoother transition out of the role, while maintaining mutual respect and dignity.
Payment in lieu includes your salary for the notice period, and is taxable but not subject to employer CPF contributions. Many companies prefer this method to help employees avoid discomfort in the workplace.
2. Garden leave
Garden leave allows you to stay officially employed (and paid) while being released from active duties. You remain bound by your contract, including clauses that restrict you from starting work at another company during the period. This is common for senior roles, or positions that involve working with sensitive or proprietary information
3. Extended notice periods
Some employers may request that you continue working through your notice period, especially if you are handling ongoing projects.
While this isn’t mandatory, seeing projects through to the end can help you showcase your dedication and outcomes on your resume. It also helps you to preserve goodwill with your employer, which can help you secure a positive professional reference.
What to consider when deciding your notice period
It’s best to discuss and align on your last day with your employer. Here are some steps you can take:
- Take time to understand the retrenchment terms and clarify anything you’re unsure of.
- Review your employment contract thoroughly and keep a record of all communications and documents.
- Schedule a follow-up with HR to clarify any remaining questions, such as your eligibility for career counselling, insurance coverage, or other support services.
While some employees may feel compelled to serve their notice period out of loyalty, it’s essential to consider your personal well-being and your ability to move forward meaningfully. Choosing to leave an environment that is stressful or uncomfortable immediately can be more beneficial than completing your notice period.
Step forward with clarity and confidence
Retrenchment can be a setback, but it could also be the push you need to meaningfully plan your next career move. If finances are your primary concern, support is available. If your job loss was involuntary and you earned $5,000 or less a month on average in the last 12 months, you may be eligible for the SkillsFuture Jobseeker Support Scheme. It offers temporary financial payouts of up to $6,000 over six months to help tide you through this transition.
This article is contributed by Randstad Singapore.
