Top 3 Best Practices for Retrenchment Exercises

ManagementNovember 24, 2022 10:00



Is a retrenchment exercise inevitable due to your company’s business situation? Your company has implemented other cost-cutting alternatives to no avail—there is no other choice but to lay off staff as a last resort.

Before conducting a retrenchment exercise to manage excess manpower, your company should develop a well-thought out strategy. There must be a clear objective for the retrenchment, such as reducing costs or streamlining business operations.


Take note that your company has to inform the Ministry of Manpower (MOM) of this retrenchment exercise. The Employment Act mandates that Singapore-registered employers with at least ten employees must notify MOM if they have retrenched more than five employees within any six-month period.

Retrenchment exercises are never easy—and when handled indelicately, they may potentially damage your company’s reputation. Here are the top 3 best practices which your company should adopt when carrying out a retrenchment exercise.


1. Communicate clearly regarding the retrenchment exercise

The first best practice concerns the delivery of the retrenchment message. When your company sends out an internal memo to announce the retrenchment exercise, the memo should be phrased in a clear and concise manner with no ambiguity. Be as transparent as possible about your company’s financial situation which necessitates the retrenchment.

Inform your employees early—the memo should give retrenched employees adequate notice so that they can start making alternative employment arrangements. Moreover, it is important that all employees are aware of the retrenchment exercise before the media catches wind of the news. They should not be finding out from reading the newspapers or browsing social media. Above all, treat the retrenched employees with much empathy and dignity.

2. Provide adequate support to retrenched employees

The second best practice is to provide adequate support to the employees who are being retrenched. Such support should include—and extend beyond—the necessary retrenchment benefits. Employees who have been working in the company for at least two years are eligible for retrenchment benefits, with the prevailing norm being two weeks’ to a month’s salary per year of service.

Besides the provision of retrenchment benefits which are fair and in line with industry standards, your company can consider offering counselling services. Engage experienced counsellors to provide psychological and emotional support to the retrenched employees. Your company should be sensitive not only to the retrenched employees’ emotional needs, but also their concerns about employability.

In line with MOM’s recommendations, your company can consider making practicable efforts to place affected employees in their next jobs. This outplacement assistance includes providing retrenched employees with referral letters and testimonials to facilitate their job search. If possible, your company can also enlist the help of intermediaries such as recruitment agencies to identify suitable job opportunities for every retrenched employee.

3. Boost the morale of your remaining employees

The third best practice is to boost the morale of your remaining employees. Those who survived a retrenchment exercise may experience feelings of job insecurity—and consequently become disengaged at work. Allay their anxieties about losing their jobs via consistent and transparent updates of your company’s plans moving forward.

Other than reassuring your remaining employees, consciously work towards a slow and smooth transition of responsibilities. It may be necessary to equip your employees with the proper skills training so that they can take on new tasks. Also, be mindful to rebuild team dynamics which may have been impacted by the retrenchment exercise.

By adopting these top 3 best practices, your company can ensure that the retrenchment exercise is conducted in a compassionate and respectful manner.


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