Retrenchment is never a pleasant experience, especially when you do not have a substantial cash reserve to fall back on. Yet, companies sometimes have to lay off some workers due to limited cash flow. Most offer retrenchment benefits to ease the financial burden.
The reality is that if you are left unemployed, money might soon become a challenge. While you can get a cash loan to offset some of your expenses, it’s best to understand the retrenchment benefits you may be entitled to before taking one out. Here’s what you need to know about retrenchment benefits in Singapore.
What is Retrenchment?
Retrenchment refers to companies terminating employees’ contracts due to redundancy or business reorganisation. The Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment mandates employers to use lay-off as a last resort.
Singapore’s Ministry of Manpower retrenchment benefits guidelines mandates employers to inform the ministry within five days after letting their workers know. This timely notice allows it to inform relevant agencies capable of helping the affected workers.
These agencies have different packages, but you do not have to wait for them. Also, they might not always have the best terms despite their primary purpose of lending a helping hand.
Existing Laws Set to Protect Workers
The Ministry of Manpower (MOM) has established guidelines for companies that cannot move forward without retrenchment. These guides provide relief to the retrenched workers till they get something else.
The laws governing retrenchment Singapore are as follows:
Notice Period
MOM mandates companies to give notice periods to their employees before laying them off. This advance notice gives the workers a head start in looking for a new job or better preparing for the lay-off period. The notice periods for various lengths of employment are as follows:
- A minimum of 1 day for less than 26 weeks of employment
- A minimum of 1 week for 26 weeks to less than 2 years
- 2 weeks for 2 years to less than 5 years
- 4 weeks for 5 years and above
How Much Should I Receive as Retrenchment Benefits?
MOM’s regulations are void if your employment contract contains the amount. The amount paid as Singapore retrenchment benefits depends on the company’s financial capacity. As a result, you might receive something lower.
Let us clarify something at this point. Severance pay depends on your company and contract agreements and is not directly related to retrenchment benefits MOM.
The retrenchment benefits calculation in MOM are as shown below:
- 2 weeks or a 1-month salary for a year of service
- 3.5-months’ worth of wages to workers over 61 years of age as a one-time payment.
Are Retrenchment Benefits Compulsory in Singapore?
Retrenchment compensation is not compulsory in Singapore unless stated clearly in the contract clause.
The Ministry of Manpower’s employment practices states that only employees with at least 2 years of service are eligible for retrenchment benefits. Notwithstanding, they encourage employers to offer an ex-gratia payment out of goodwill.
Things could spiral out of control if you are in the less than 2-year spectrum. Reach out to our customer service representative today to avoid making the wrong decisions that will engulf you in financial debt.
Losing a job is unpleasant, but you can pull through it. However, be deliberate about your approach while searching for a new job.
Final Thoughts
Retrenchment is already an unpleasant experience. While finding the appropriate cash supply can be daunting, it is not the case with i-Credit. We are not only invested in giving you a loan but also concerned about your well-being.
Our services come with competitive interest rates and flexible repayment terms, irrespective of your challenging situation. Even if you have a poor credit history, we have something for you.
We run a versatile system where you can either visit us at our office or get everything from your mobile phone or PC. Either way, we offer rapt attention to fashion the right loan to offer you much-needed relief.
At i-Credit, we thrive on the following:
- A quick loan approval process
- Tailor-made financial solutions
- Competitive rates
- Accommodating repayment terms
- Honest and customer focused
When you contact i-Credit, you can be sure of getting custom-designed loans. In no time, you will get the cash flow through your lay-off period as you inch closer to finding a new job. You might even get an offer before the loan expiry period.
Retrenchment benefits are great. However, you are at the mercy of your employer if you have worked for less than two years before being laid off. Though the government encourages them to make ex-gratia payments, you do not have to depend solely on that.
Your best play might be to take an retrenchment loan. If you plan on doing that, call us today or fill out the Licensed Moneylender application form on our website.
Frequently Asked Questions
Are retrenchment benefits Singapore taxable?
Payments received for loss of employment do not qualify for taxation. However, ex-gratia, salary in lieu or notice, and gratuity are taxable since they are payments for services rendered.
Can I find unemployment loans?
You can find loans if you are out of work. Contact us at i-Credit today, and we will help you get back on your feet in no time.
Can my employer terminate my contract without retrenchment benefits?
Termination can only be lay-off if your employer has no plans to fill the vacancy soon. Aside from that, you are not eligible for retrenchment benefits.