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Industry Insights

Tripartite advisory on managing excess manpower

Posted on 17/04/2020 by PrimeHR

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POSSIBLE MEASURES TO MANAGE EXCESS MANPOWER

The following measures are intended to help employers keep their businesses viable and support employees during economic  downturns so that fewer jobs are lost. The measures are broadly categorised based on the severity of impact to employees:

I. Adjustments to Work Arrangements without Wage Cuts
II. Adjustments to Work Arrangements with Wage Cuts
III. Direct Adjustments to Wages
IV. No-pay Leave

Employers should consider the measures but need not apply them sequentially. In general, adjustments to work arrangements with or without wage cuts are more applicable to employers who wish to scale down or suspend business operations in response to a short, temporary decline in business activities. In contrast, direct adjustments to wages and no-pay leave may be more applicable to employers if they are suffering from extremely poor or uncertain business conditions that are likely to be long term.

In implementing these measures, employers should consult and seek the consent of unions and employees early and communicate the impact of the measures clearly given that the livelihood of employees are at stake. Employers should review and restore any  adjustments made when their businesses recover.


I. ADJUSTMENTS TO WORK ARRANGEMENTS WITHOUT WAGE CUTS

A. Training and skills upgrading of employees
Training and skills upgrading of employees is one of the key strategies
recommended by tripartite partners. Employers could also receive absentee
payroll subsidies for employees undergoing training. Training employees
could support employers in the following ways:

  • Increase in productivity by equipping employees with better skills and

  • knowledge

  • Redeploy excess manpower to vacancies in different areas

  • Retain skilled employees to enable company to meet business demand when economic growth recovers

B. Redeployment of employees to alternative areas of work within the company

If changes are structural, employees can be redeployed or rotated when the job scope is enlarged, enriched or restructured and  elevant training should be provided to them. When there are no other available jobs for them within the company, employers can consider outplacing the affected employees to suitable jobs in other companies, taking into consideration their physical and mental conditions, skills and experience.


C. Flexible Work Schedule (FWS)

FWS allows companies to optimise the use of manpower resources when they go through cyclical troughs and peaks in manpower demands; and employees are assured of a stable monthly income during the period of FWS.

To illustrate, the employer and employee (covered under Part IV of the Employment Act) agrees to reduce weekly working hours from 44 hours to 40 hours for 4 weeks and the accrued 16 hours are then used to offset the increase in work hours (above 44 hours) in the next 4 weeks. In offsetting the overtime pay incurred in the next 4 weeks, the employee (or union if company is unionised) and employer may agree on the rate at which the accrued hours are to be valued.

Employers who wish to implement FWS need to seek the support of the unions and employees and thereafter apply to the  Commissioner for Labour. Other than overtime exemption, the employer may apply to be exempted from the Employment Act provisions on pay for work on rest days and public holidays, provided that certain conditions including the safety and health of
employees, are met. More details on the qualifying conditions can be found on the MOM website.


II. ADJUSTMENTS TO WORK ARRANGEMENTS WITH WAGE CUTS

A. Part-time work, sharing of jobs or other work arrangements
Companies may consider implementing other work arrangements such as part-time work and sharing of jobs or other flexible work arrangements, depending on the operational needs and the severity of the downturn. More details on such work arrangements can be found on the MOM website.


B. Shorter work week
Shorter work week translates into the reduction of work hours. Employers may:

  • Request employees to take up to 50% of their earned annual leave

  • Implement the reduction in work week such that it does not exceed 3 days in a week (a reduction of 3 days should only be implemented if the company's performance is severely affected) and does not last for more than 3 months at any one instance subject to review

  • Pay the affected employees not less than 50% of their wage on the day(s) when the employees are not working, during the period when the shorter work week is implemented

C. Temporary layoff

Temporary layoff can be a result of facility shutdowns where a work site is closed for a designated period while some administrative functions are still performed or applied broadly across the whole company. Employers may:

  • Request employees to take up to 50% of their earned annual leave

  • Implement the layoff period such that it does not exceed one month at any one instance subject to review

  • Pay the affected employees not less than 50% of their wage during the layoff period

III. DIRECT ADJUSTMENTS TO WAGES
The tripartite partners recognise that some companies may have to implement more severe cost-saving measures if they are suffering from extremely poor or uncertain business conditions that are likely to be long term. As these measures result in wage
cuts over an extended period of time, severely impacting the livelihood of employees, employers should engage and seek the consent of unions and employees before implementing these measures. Companies with a flexible wage system in place may consider adjusting the following wage components to further reduce manpower costs:


i. Annual Wage Increment
If the need arises, the company may consider reducing the annual increment or introduce a wage freeze if the situation warrants it, the extent of which should depend on the company's financial position.


ii. Variable Bonus Payment
This component is directly linked to the company's performance and the continuation of such a payment will depend on the profitability of the company. Hence, when a company is not performing well, bonus payment will be reduced or not given.


iii. Annual Wage Supplement (AWS)
If business conditions continue to worsen, another component to be considered for reduction is the AWS, which is usually one month's wage to be paid at the end of the year.


iv. Monthly Variable Component (MVC) and/or other allowances
The MVC, which forms a part of the basic wage, allows the company to adjust wages quickly in response to changes in the business environment without having to wait until the end of the year to adjust variable bonus payments and other annual variable components.

Employers can consider adjusting the MVC downwards, if the company has already put in place an MVC in the wage structure. The extent of the adjustment would depend on the company's situation and any key performance indicators or guidelines for triggering an MVC cut as agreed with the union (if company is unionised) or employees.

For a company which has not implemented the MVC but needs to adjust monthly wages downwards, the company could consider treating any cut in basic wages of up to 10% as MVC cut. The company should set clear guidelines to restore the MVC cut through future wage increases or adjustments when their business recovers. In the case of managers/executives, depending on the circumstances and requirements of the company, the MVC set aside could be more than 10% of basic wages, in line with the principle of leadership by example.

Employers should take into account the cut in total monthly wages, which may include MVC and allowances, to ensure that any reduction will not result in undue hardships to affected employees.


IV. NO-PAY LEAVE
As a last resort, some companies may have to put employees on no-pay leave in
order to survive and save jobs. In implementing no-pay leave,

  • Companies should have considered/implemented other measures, and consulted their unions and employees

  • Companies should recognise the impact on rank-and-file employees in determining the extent and duration of the measure

  • Senior management should lead by example, by accepting earlier and/or deeper cuts in cost-saving measures

  • If business conditions warrant it, companies could apply no-pay leave in conjunction with other cost-saving measures


Notification of TAFEP and/or the Relevant Union
It is not mandatory to inform the Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) of the retrenchment exercise. However, if you choose to do so, it will be able to provide advice on compliance with the Advisory.


Where the company is unionized, the company is recommended to inform and consult the union on the retrenchment exercise. In most collective agreements, the norm is to inform the union 1 month before notification of the employees (see below).


Mandatory Notification of MOM
It is mandatory for employers with businesses registered in Singapore to notify the Ministry of Manpower (MOM) of the retrenchment exercise if the employer has:


  • At least 10 employees; and

  • Notified 5 or more employees of their retrenchment within any 6-month period. This 6-month period is measured from the date on which an employee is informed of his retrenchment, and includes the dates on which all other employees (amounting to 5 employees or more in total) are notified, before the end of the 6-month period.

  • This notification must be done within 5 working days after the employer notifies their employees of their retrenchment.

The employer may complete this procedure through a 24 hours online service on MOM’s website within 10 to 15 minutes. Do note that a CorpPass account is required to use this service.


The information required in the procedure includes:

  • Company name and Unique Entity Number;

  • Company contact person details;

  • Name of union (if the company is unionized), and whether union was consulted;

  • Number of employees prior to the retrenchment exercise;

  • Details of employees to be retrenched (i.e. name, NRIC or FIN, residential status, job title, date of effective retrenchment, date of notification of retrenchment to employees);

  • Payment of retrenchment benefits and amount; and

  • Provision of employment facilitation assistance.

If the employer is a small company with less than 10 employees or if the retrenchment concerns less than 5 employees, notification to MOM is not compulsory.


However, they are still encouraged to notify MOM because it would allow tripartite partners to help the affected employees find employment and/or relevant training. Where any labour issues arise, MOM can also assist to advise the employer on such issues.


Early communication to employees
Employers should let employees know about the upcoming retrenchment exercise, and the reasons for it, before the exercise is made known to the public.


When informing employees, the employer could:
  • Describe the dire economic situation resulting in the need for retrenchment;

  • Outline how the exercise will be implemented;

  • Specify the factors that were taken into consideration on selecting the employees to be retrenched; and

  • Detail any assistance that will be offered to affected employees.

Should you require assistance please call us at +65 6334 4328.