Retrenchment In Singapore 2008

The Straits Times
Nov 20, 2008
RETRENCHMENT IN SINGAPORE
Only as a last resort

GENERAL retrenchment is a top concern in Singapore in a deepening economic recession as we now have. Our Ministry of Manpower has also come out with timely guidelines for retrenchment procedures.
The labour market is not a fish or vegetable market. Nor is it a stock market. We are dealing with human beings and also their dependent families.

In Singapore, thus, we have developed a tradition of retrenching workers as a last, and not first, resort.

When retrenchment takes place, the employees will be unemployed and there are no unemployment benefits in Singapore. The burden of taking care of the unemployed will be passed on to the community. Our Government, using past experience as a guide, will come in to share the problem and the unemployment burden with taxpayers' money. The timing of the retrenchment is particularly important. When it is done during a recessionary environment, the fear and anxiety factor multiplies. An important retrenchment exercise may lead to other similar exercises in other companies.

In Singapore, the practice in handling general retrenchment in a deflationary downturn appears to me as follows:

First, consideration for the removal of the monthly variable component of the employees across the board, from the CEO downwards.

Second, to remove a part of, or even completely, the end-of-the-year variable bonus, across the board from the CEO down as well.

Third, if the general recessionary situation is serious enough, the Government will step in to help in various ways depending on the situation.

Fourth, we still have the unique mechanism of last resort. With the support of our trade unions and our workers, the Government can and will cut the employers' Central Provident Fund contribution rates. This is an action of last, last resort. This is tripartism in Singapore.

Singapore has opted for a flexible wage policy instead of a flexible unemployment policy; a communitarian approach rather than the general firing of workers at a first-sign-of-trouble strategy.

Employers should thus not lose heart. Singaporeans will go through this very difficult period and emerge together with the ultimate smile of success. Does anyone still wonder why the World Economic Forum consistently ranks Singapore's industrial relations system as the best in the world?

The just-published Economic Freedom of the World 2008 Annual Report not only states that Singapore has the world's second highest level of economic freedom among 141 countries surveyed, but also uses this important variable to explain the very high per capita income and the excellent quality of life in this country. I am one of many citizens here who are concerned about global retrenchments and their adverse impact on Singapore's retrenchment.

Professor Lim Chong Yah
Albert Winsemius Chair Professor of Economics
Nanyang Technological University

FORUM NOTE: Prof Lim is the founding chairman of the National Wages Council in 1972 and served until 2001. The council advises the Government on wage policies and issues wage guidelines.