In this series, manpower reporter Tay Hong Yi offers practical answers to candid questions on navigating workplace challenges and getting ahead in your career. Get more tips by signing up to The Straits Times’ HeadSTart newsletter.

Q: My company will cease operations in a few months, but insists its employees stay on until it winds up in order to receive retrenchment benefits. Is this lawful?

A: It is not unlawful for an employer to tie retrenchment benefits to staying on with the company until a given point in time, says Ms Goh Seow Hui, partner at law firm Bird & Bird ATMD.

Workers in Singapore are not entitled by law to be paid retrenchment benefits, unless there are provisions for such benefits in one’s employment agreement, or in the company policies the agreement refers to, she says.

Ms Goh adds that employees who resign after being notified of an impending retrenchment that will affect them, for which severance payment is promised, are arguably not entitled to such payments.

“Severance or retrenchment payments are triggered by the employer’s act of termination,” says Ms Goh. “An employee has the right to resign any time or for any reason, but the act of resignation will not trigger additional payments from the employer.”

According to Mr Mohammed Reza, partner at law firm Simmons & Simmons, employees may be entitled to retrenchment benefits if they belong to a union that has a collective bargaining agreement in place with their employer.

The details of what the employer has promised will impact whether employees who resign ahead of their eventual retrenchment are entitled to a payout, Mr Reza says.

Such details could include the stated eligibility period for a retrenchment payout.

A tripartite advisory on how companies should manage excess manpower and carry out retrenchment responsibly states that the prevailing norm is for employers to pay a retrenchment benefit amounting to between two weeks’ and a month’s salary for each year of service.

This advisory, however, has no force of law, according to Mr Reza.

Instead, it is more common for an employer to specify retrenchment benefits in an internal policy, as opposed to an employment contract, which would generally not grant employees any rights or entitlements to retrenchment benefits.

The advisory also states that the amount of a retrenchment benefit can vary based on the company’s financial position, and the company’s imminent closure can be taken into consideration, says Mr Reza.

If there are better job prospects elsewhere, especially in a robust hiring market where there are immediate openings available, employees might be less willing to stay on until their company ceases operations, Ms Goh says.

Employees in large and multinational organisations may want to stay on and maintain goodwill in order to explore deployment opportunities within other arms of the company, she adds.

Employers also need to consider staff morale, operational needs, reputation, business stability and logistics in determining whether to lay off staff right after announcing plans to wind up, or delay the retrenchment for some time after the announcement.

Ms Goh says: “In a case of winding up, my view is that giving staff sufficient notice and taking a transparent approach is the better way to it.”

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