The Legal Issues Surrounding Retrenchment and Retirement in Singapore

During the downsizing of a business, you may wish to retrench some of your employees. To avoid employment disputes or any unnecessary civil claims, it is important to seek legal advice from lawyers in Singapore like GJC law. This article will address some of the implications the Employment Act has on employment contract issues such as retrenchment and retirement.

Under section 45 of the Employment Act, employees are required to serve a minimum period of two years before they have any right to claim retrenchment payouts. Employers are not legally obliged to pay compensation to retrenched employees. Rules relating to unionized companies may vary, a contract lawyer should be sought to review the terms in the collective agreement. Although section 45 mentions a time period of two years, it is silent on the amount. Generally, the majority of companies award two weeks’ salary for each year of service to the company.

Section 46 of the Employment Act deals with retirement. It states that employees who have not worked for at least five years will not be entitled to any benefits of retirement, other than the provisions under the CPF scheme. The amount an employee can receive upon retirement can be provided in the employment contract, but this is rare and a contract lawyer may assist you in looking closely at the employment contract issues that may arise. Lawyers in Singapore should refer to the Retirement and Re-employment Act when addressing the possibility of retirement payouts. When an employee reaches 62 years of age, the employer should consult the employee as to whether he or she would like to be re-employed, assuming his/her medical fitness and performance. Assuming the employee wishes to continue, an employment contract should be given to provide for employment until age 65. Once the employee reaches the age of 65, there is no payout. However, if the organization does not have a vacancy for him, then the employee should be awarded with a payment as gratuity. Employment lawyers in Singapore should be consulted for legal advice regarding the quantification of this amount.