Parliament: Employers who retrench workers but disguise it as something else to avoid paying benefits would face penalties

Manpower Minister Josephine Teo also noted that employers might struggle to fulfil their obligations. PHOTO: GOV.SG

SINGAPORE - Employers who retrench their staff, but disguise it as something else to avoid giving out retrenchment benefits run the risk of incurring penalties, Manpower Minister Josephine Teo told Parliament on Thursday (June 4).

As many as 100,000 people could be retrenched this year, as Singapore - hard hit by the Covid-19 pandemic - heads for its worst recession since independence in 1965. The economy is expected to shrink by 4 to 7 per cent this year.

An employee is presumed to have been retrenched if the employer cannot show a plan to fill the vacancy any time soon, and this rings true regardless of what the termination of employment is called, Mrs Teo said.

"If the retrenchment benefit is spelt out in the employment contract or collective agreement, the employer has a clear obligation to pay. He cannot sidestep it by calling the retrenchment something else.

"If a company is found to have disguised their retrenchments, the Ministry of Manpower (MOM) can and will consider withdrawing government support like JSS and suspending their work pass privileges," she added, referring to the Covid-19 Jobs Support Scheme that co-pays salaries to help firms retain workers.

The minister was replying to MPs who had asked about fair treatment of workers when they are retrenched, terminated or have their wages reduced.

She also noted that employers might struggle to fulfil their obligations.

"The tripartite partners have, therefore, agreed that in instances of genuine financial difficulty for the employer, retrenchment benefit may be renegotiated or moderated. The norms may have to be set aside in these abnormal times.

"Nevertheless, businesses should still give some support to retrenched employees, to the extent that they can afford."

She added that her ministry requires employers to submit notifications of cost-saving measures they plan to introduce. Her ministry and the Tripartite Alliance for Fair and Progressive Employment Practices will then "identify companies for further engagement", for instance if the planned wage cuts seem excessive.

"Following our intervention, many companies reviewed their cost-saving measures to give more wage support to employees," she said.

She also urged employers and employees to communicate openly.

"Quite often, the worker suspects he has not been fairly treated because of poor communication with his employer... The cases we reviewed show that in the course of saving the business and preserving jobs, workers and employers need to build trust and maintain open communication."


Mrs Teo indicated that there are no plans to reduce Central Provident Fund (CPF) contribution rates amid the Covid-19 outbreak.

Mr Seah Kian Peng (Marine Parade GRC) had asked if the Government would consider temporarily reducing CPF contributions of employees and employers till after the economy has recovered from the crisis.

But the minister noted that the JSS, which provides employers with wage subsidies, would reduce the cost burden for employers, and with "fewer drawbacks".

"For example, those who depend on CPF contributions to meet housing and healthcare needs can continue to do so. Singaporeans' ability to save for retirement is also not eroded... (The) JSS is able to target stronger support at sectors that are more affected by the Covid-19 outbreak," she argued.

Employers, she added, can also consider reducing non-wage costs, make use of the SkillsFuture Enterprise Credit to train workers and consider using the monthly variable component to adjust wages to save jobs.

"Nevertheless, we will continue to monitor and assess the situation, and consider whether other measures, including adjusting CPF contributions, may be necessary in the future."

Responding, Mr Seah said that in the current economic climate, "every little bit we can put on the table for (employees) is something which would certainly help".

"I hope the minister will put (reducing CPF rates) as a high priority item - something to be activated sooner rather than later."

Mrs Teo replied that in the event of a CPF contribution cut, there is "very little likelihood" individuals can make up for what they were not able to grow in their CPF savings for retirement.

"So it is a decision that we have to take very carefully... especially (as) our people will continue to live long lives."


Mr Saktiandi Supaat (Bishan-Toa Payoh GRC) asked how common it was for employers and recruiters to ask job seekers to declare their last-drawn salary, or to share previous payslips.

Are there any studies on how this might affect people's employability and their salary, he asked, and should this practice be stopped, so job applicants can move up the wage scale?

Mrs Teo, a former director of human resources at the National Trades Union Congress, said there is no rule requiring job seekers to comply with requests to declare their last-drawn salary, nor can employers insist on it.

She added: "The last-drawn salary is a relevant input to employers seeking to gauge a candidate's seniority or to make an appropriate job offer. However, if employers use last-drawn salary to screen applicants, they risk losing out on good candidates who are prepared to adjust their salary expectations, especially in today's context.

"It is similarly unwise for employers to overlook the longer track record of the applicant, and make an offer based solely on the last-drawn salary, especially if the last-held position was an interim one. If a job seeker chooses to provide salary information, employers should use it carefully."

Mr Saktiandi said he knows of fresh graduates who are wary of taking up jobs that pay below the median salary "for fear that their salaries will always be pegged to it. They would rather wait it out... if they can rely on their parents, leading to months of post-graduation unemployment".

Some places, like California, have in recent years banned employers from asking employees about their previous salary. Advocates have argued that, given the pay gap between men and women, asking job seekers for their salary history is unfair.

With a nod to California, Mr Louis Ng (Nee Soon GRC) asked if the MOM had studied the extent to which having job seekers declare their last-drawn salary contributes to the gender wage gap in Singapore.

"Not specifically," Mrs Teo replied. "There are many other contributing factors that are more prominent. We have many priorities, a lot of things on our plate... it would not be realistic to chase down every study."

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