In today's dynamic global market, evolving business priorities and economic conditions are driving companies to reallocate resources toward business and technological advancements.
Many organisations are making tough decisions to restructure their workforce, directly impacting their employees. Retrenchment, once considered a last resort has become a reality as some employees find themselves facing unexpected career transitions.
When faced with a retrenchment, employees often have many questions about the reason behind the company’s decision, their retrenchment entitlements, and what they should be doing next. One question that frequently comes up during this challenging time is whether you need to serve your notice period if you've been retrenched.
Understanding your options during a retrenchment is key to helping you overcome one of the most difficult challenges in your work life. A key concern for many is understanding the retrenchment notice period and its associated entitlements.
In this article, we'll explore the key factors that determine whether you need to serve a notice period, the potential implications for your severance package, and how to approach this situation professionally.
understanding your retrenchment package and compensation structure
As outlined by MOM's retrenchment guidelines on responsible retrenchment, employees who have served at least 2 years with their employer are eligible for retrenchment benefits.
While there is no mandatory retrenchment payment amount set by law, the payment should be based on what is specified in the employment contract or upon agreement during the announcement.
1. what are retrenchment letters?
A retrenchment letter serves as an official notice to employees that their position is being made redundant. Rather than simply being a formality, it's a critical document that outlines the terms of the retrenchment, including the date of termination and what the retrenchment package includes.
Retrenchment letters are important for a variety of reasons. They help employers align with the responsible retrenchment practices and provide employees with information about their entitlements, such as their remaining salary or any compensation for unused leave.
The letter serves as a useful document for future job applications, accessing government support schemes or addressing any potential disputes. They also help both parties clarify post-employment obligations, such as non-compete clauses or confidentiality agreements.
2. how to calculate retrenchment compensation in singapore.
The market practice for retrenchment benefits, as outlined by MOM's guidelines on responsible retrenchment practices, is between 2 weeks to 1 month of salary per year of service. Your monetary value of your retrenchment package should take into account:
- Remaining salary up to your last day of work
- Payment for unused annual leave
- Retrenchment benefit based on years of service
- Pro-rated annual wage supplement (AWS) or bonus, if applicable
- Any other contractually agreed payments
Example: Calculating a Retrenchment Package
Tenure: 5 years
Work Schedule: Mondays to Fridays, 5 days a week
Gross Salary: SGD 8,000 per month
Unused annual leave: 10 days
Notice period: 1 month (as per contract)
Last day of work: March 31, 2025
Payment for unused annual leave:
Daily salary: (SGD 8,000 / 12) x (52 weeks / 5 days) = SGD 369.23 per day
Payment for unused annual leave: 10 days × SGD 369.23 = SGD 3,692.30
Retrenchment benefit: Between 2 weeks to 1 month of salary per year of service
Assuming 1 month's salary per year of service: SGD 8,000 × 5 years = SGD 40,000
Assuming there are no additional payments agreed upon in the contract.
Remaining salary: SGD 8,000
Unused annual leave: SGD 3,692.30
Retrenchment benefit: SGD 40,000
Total: SGD 8,000 + SGD 3,692.30 + SGD 40,000 = SGD 51,692.30
notice period after a retrenchment
When faced with retrenchment in Singapore, many employees are uncertain about their notice period obligations. Do you have to leave the company immediately, or work on a handover?
The simple answer is: employees are not required to serve their notice period when retrenched.
However, employees may be presented with different options that they can negotiate. Regardless of the options, the retrenchment process should follow tripartite guidelines to maintain fairness and dignity.
Let's explore the different options and key factors affecting notice period following a retrenchment and how you can approach it.
1. receiving payment in lieu of notice
Most employers in Singapore will offer payment in lieu of notice as the common practice to both employers and employees during retrenchment. This means that your last day will be much earlier than expected.
If your employer opts to pay you in lieu of notice, they will compensate you for the notice period and your last day of employment will be brought forward to an earlier date, or in some instances, immediately.
The amount paid for salary in lieu of notice would encompass your unused annual leave and your balance work days, excluding the retrenchment package calculated based on your previous years. While salary in lieu of notice is taxable, it does not attract CPF contributions from the employer. However, CPF contributions are still payable on the wages paid to the employee up to their last official day of employment.
Most companies offer this to their retrenched employees as it helps save any awkwardness that you may experience among your colleagues in the office.
2. what you need to know about garden leave
In Singapore's employment landscape, “garden leave” is one of the common practices during a retrenchment. The benefits for the employees are similar to the payment in lieu of notice, except that they are still tied to your employment contract until your last official day. While not explicitly covered by Singapore's Employment Act, garden leave is governed by contract law and common law principles.
Employers in competitive industries tend to offer this and the difference is that instead of getting paid your retrenchment package immediately, you’ll be paid regularly during your garden leave. Employees on garden leave remain bound by their employment contract terms, including confidentiality obligations and restrictions on working for competitors.
This is common practice for employees who hold key executive positions or are responsible for confidential and proprietary company information. When on garden leave, employees’ job search efforts are limited to companies that are not direct competitors of the employer. However, these limitations tend to get lifted once the garden leave ends.
However, employees should still review their employment and retrenchment contracts to check for non-disclosure clauses that limit their job search to a list of companies for a set period of time, even after their garden leave ends.
3. extended notice periods: a win-win scenario
While you are not legally required to complete your notice period after being informed of your retrenchment, some employers may request that you continue working until your last day of employment, which is typically a month after notifying you of your retrenchment.
This is particularly common for employees managing multiple projects within the organisation. The primary reason for this extension is to ensure project completion and facilitate knowledge transfer, so that the rest of the team is equipped to maintain ongoing initiatives.
From an employer's perspective, extending the notice period can help preserve positive relationships with departing employees, which in turn supports the company's reputation in the labour market. While not legally required, this practice is increasingly viewed as a hallmark of good corporate citizenship, reflecting a commitment to responsible retrenchment practices.
However, you may have mixed feelings about this approach. On one hand, completing your projects allows you to showcase your full accomplishments on your resume. On the other hand, this obligation may limit your ability to seek new employment opportunities, as you do not have enough time to search for new opportunities.
It’s also normal to feel less motivated to work for a company after being informed of your retrenchment. This decline in motivation can lead to reduced productivity and engagement in your tasks, which are understandable given the circumstances. However, it’s still advisable to maintain a professional attitude at work to retain valued relationships you’ve built with your colleagues.
what should you consider when deciding your notice period
Since it is not mandatory for you to serve your notice period, you may find yourself negotiating when your last date of employment should be. While you can request to leave before your notice period ends, this must be mutually agreed upon with your employer.
If you choose to leave immediately without your employer's agreement, it may be considered a resignation instead of a retrenchment, causing you to lose your retrenchment benefits. Here are three situations that you should consider.
1. immediate steps to take after your retrenchment
During a retrenchment exercise, you are typically invited to a private conversation with your line manager and a member of the HR department. This meeting presents the opportunity to clarify any questions you may have about the retrenchment process and understand the reasons behind this decision.
Receiving a retrenchment notice can be emotionally difficult, but taking informed steps can help you navigate this transition smoothly. Here are some key steps you should take immediately after receiving a retrenchment notice.
- Thoroughly review your employment contract to understand what your entitlements are, and what you are contractually obligated to do before retrenchment. This includes checking for any notice period requirements, retrenchment benefits and post-employment elements such as non-compete clauses or confidentiality agreements.
- It’s essential to document all relevant information related to your retrenchment, including the retrenchment letter, any communication with your employer and details of your retrenchment package. Keeping a record of these documents will be helpful if you need to refer to them later or if you encounter any discrepancies.
- Schedule a follow-up meeting with HR to clarify any doubts or questions you may have, particularly with regard to the calculation breakdown of your retrenchment package and access to outplacement services like career counselling or medical insurance, if any.
2. timing your next career move
It’s always important to always have a pulse on the job market as business conditions and job openings can change rapidly. Opting for payment in lieu of notice can be beneficial when timing is crucial to your next career move.
Having the flexibility to transition to a new role quickly is particularly valuable for employees to seize time-sensitive opportunities that might otherwise be lost due to notice periods. A quick browse on job sites can give you an idea on the current job opportunities that are available.
In a stressful or uncomfortable workplace, leaving immediately can be helpful to your well-being. While you may be tempted to serve your notice period as a gesture of goodwill, staying at the same company that has decided to retrench you can severely impact your mental health.
Though certain roles can be extremely lucrative for salary, no job is worth sacrificing your personal joy. This is especially true for those who have worked for a long period of time and a part of them see the retrenchment as a relief as they are able to take a short break before their next role.
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common questions about retrenchment
Have you ever wondered what to do after a retrenchment exercise? Here are the top five questions people ask about retrenchment in Singapore.
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1. how to calculate retrenchment compensation in singapore?
Calculating retrenchment compensation in Singapore involves several components, as outlined by the Ministry of Manpower's (MOM) guidelines on responsible retrenchment. While it is always important for you to calculate your retrenchment package, please note that practices may differ between companies.
If unsure, you should request for the full breakdown from your HR department or check in with your peers. If you feel you have been wrongfully dismissed by your employer, you can file a wrongful dismissal claim with TADM within one month from the last day of your employment.
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2. is retrenchment benefit compulsory in singapore?
Retrenchment benefits are not legally mandated in Singapore; there is no specific law that forces a company to give retrenchment benefits. However, according to MOM's guidelines, employees who have served at least two years with their employer are generally eligible for retrenchment benefits and in line with market practice to provide at least 2 weeks to 1 month salary for each year of service.
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3. how to deal with retrenchment?
Dealing with retrenchment involves not only practical but emotional management. While the initial steps of understanding your entitlements and clarifying the retrenchment process with your employer are important, it is even more important that you put yourself first.
Take the time to review your career objectives and goals, and prioritise your well-being by seeking support from friends, family or professional counselors.
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4. what support services are available after retrenchment?
Your employer may provide you with support after retrenchment, such as through outplacement services. Workforce Singapore (WSG) also provides career matching and skills training programmes. Additionally, consider attending career fairs, networking events and leveraging online job portals like Randstad to explore new job opportunities.
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5. what is the distinction between retrenchment and termination?
Retrenchment typically occurs due to redundancy or restructuring within the company, where the position itself is eliminated, and is not related to the employee's performance.
On the other hand, termination usually stems from issues with misconduct, performance or other reasons related to the employee's actions or capabilities.
apply for your ideal role through randstad
Getting retrenched doesn’t always have to be a bad experience. You could take this as an opportunity to take a sabbatical after years of working, or pivot to follow your passion in a completely different career and industry.
Find your next job opportunity with Randstad. Our specialist recruiters are here to help you find the ideal role for your skills and interests. Check out our current job openings, consider your career options, and apply for a position that fits your skills and goals.