Are workers just numbers? Here's what happens behind closed doors when companies retrench
Companies laying off workers — such as Lazada — have been a cause of worry in recent times. In a special forum, the programme Talking Point uncovers the inner workings of these retrenchment exercises.
Talking Point holding its special one-hour forum, “Behind the Layoff”.
*Names have been changed
SINGAPORE: She had performed well at work and was promised an increment, yet Grace Gumala, 35, did not escape retrenchment last July.
She was among the 14,320 people in Singapore who were retrenched last year, more than double the number in 2022, according to Ministry of Manpower (MOM) estimates released in January.
This comes amid a high interest-rate environment driving up borrowing costs, as well as rising supply-chain costs.
While retrenchments are seen as normal business needs, stories like Gumala’s as well as reports of unprofessional treatment have caused worry.
Lazada figured prominently in this when the China-backed technology company’s sudden retrenchment exercise this year, and poor compensation to affected employees, led the National Trades Union Congress (NTUC) and its affiliated Food, Drinks and Allied Workers Union to step in.
Is retrenchment inevitable? Are employees just numbers? The programme Talking Point gets industry insiders to share what really goes on behind closed doors when companies decide to boot out workers — so that you can prepare yourself should you be next.
HOW COMPANIES DECIDE WHO TO CUT
Karen*, who had joined her previous company for less than a year, felt she was unfairly retrenched when push came to shove. Like Grace, as far as she could tell from her appraisal, she had been producing results.
“My company was quite irresponsible,” said Karen, choosing to remain anonymous because she had signed a non-disclosure agreement (NDA).
“I felt that we were unfairly laid off, not because of our performance but because there was no need for compensation. So we were the cheapest to lay off.”
According to the MOM website, employees who have served their company for at least two years are eligible for retrenchment benefits, while those with less than two years’ service could be granted an ex-gratia, or goodwill, payment.
Both Grace and Karen are fairly young, but the factors behind who to retrench go beyond age or years spent in the company, if at all, experts said.
“A decision is made about the business — which are the businesses that they need to downsize, … that they need to shut down,” said John*. “Whether you’re old or young, everybody in that department or team gets impacted.”
The human resources practitioner of 18 years has carried out retrenchments and wished to remain anonymous as he would be disclosing industry secrets on the show.
WATCH: Retrenchment in Singapore — How can you better protect your job? (45:21)
Those working in back-end departments, such as call centres, HR, finance and legal teams, tend to be more vulnerable to retrenchment, compared to sales staff who help the company gain revenue, said counsel Mathias Goh, who has helped companies draft retrenchment contracts.
Some businesses may undergo reorganisation, however, which is when high performers in deprioritised departments may not be spared, he suggested.
If a company is in a “big storm” and has “not been captained well”, then “everything is on the table”, said tech start-up investor Jeremy Au, on the question of why high performers might get axed.
“Not every (company) has an in-house legal counsel or HR team, and so these decisions aren’t necessarily always professional nor … well-executed. Nor is it the best outcome in the long term.”
IS THERE A BETTER TIME TO RETRENCH?
Once a company decides to retrench, the planning can take anywhere from a week to a month, said John.
A responsible company will look into the positions that will be affected, the benefits it can provide, what to say to those who are affected and the messaging to the rest who will be staying in the company, he added.
But many workers have taken issue with the timing of the announcements.
In the case of Lazada, some got meeting invitations the night before or just a few hours before they were told about their retrenchment. Some people had to cancel their leave to attend the meeting.
To cut as much cost as possible, some companies that may have planned their retrenchment in December will “jump on the opportunity” to inform employees at the start of the year, “like the second of January”, said John.
It also depends on how prepared the companies and their HR departments are. “(More) often than not, … HR and the company leave it to the last day of the week, which is a Friday,” said John.
“You’re leaving the (affected) employee without any support (over) the weekend. … Some of (them) feel too ashamed … to even tell their family members because it may be a stigma.”
Goh has a different view — that Fridays allow affected employees to “have the weekend off” so they need not return to the office the day after and explain to their colleagues what happened.
“You do want them to have some downtime to process the information,” he said. “From that perspective, letting the news out on a Friday does make sense.”
The biggest gripe for Lionel*, who was retrenched this year, was the lack of notice and transparency regarding the company’s decision. “It was quite shocking,” he said. “I didn’t know how to react.
“There were no signs or any clue. We were sent an HR invite. … When I attended (the meeting), I realised that it was a retrenchment exercise.”
Indeed, employees are not typically informed in advance about a retrenchment, said John. “Companies keep (retrenchments) very, very quiet … because they don’t want to actually rattle the rest of the company or affect their reputation.”
Does Singapore need better retrenchment laws?
In Thailand, employees must be informed at least one month before they are retrenched; and in South Korea, at least 30 days before. In the United States, employees must be notified 60 days before in the case of mass layoffs.
In Singapore, a day’s notice is required for workers with less than 26 weeks of service, and four weeks’ notice for those who have worked five years or more.
Thailand and South Korea also have severance pay laws. Singapore does not, and retrenchment benefits are backed only by guidelines in the tripartite advisory issued by the MOM, NTUC and the Singapore National Employers Federation (SNEF).
Should severance pay be written into law, “there could be a negative impact on the employees that the company can retain”, said SNEF executive director Sim Gim Guan.
“If (the company is) already in financial difficulty, and you’re demanding that they have to pay a certain amount of retrenchment, then they won’t have enough to keep the business going, which means they may have to even retrench more.”
While companies are expected to follow the tripartite advisory, “not all employers may be familiar with (it)”, he acknowledged. “It’s not surprising that in many companies, especially the smaller companies, they don’t have a full-time HR function.
“One individual may be dealing with many different issues. And depending on the priority of the day, they may not be focused on … the legislation and guidelines that are issued.”
These guidelines can still be referred to in court, said Goh, citing disputes over unfair dismissal.
The “most important thing” for SNEF is to look into preventing retrenchment in the first place, said Sim.
“What you don’t see are all the companies that have done all the right things, so that retrenchment doesn’t happen, even when they’re facing difficulties or … having to transform.
“Because they’re helping to bring their workers along — upskilling, reskilling them so that the workers continue to … contribute to the success of the company.”
DO COMPANIES CONSIDER WELL-BEING?
Perhaps what matters more than retrenchment itself is what is said to employees when letting them go. In the meeting with her manager, Karen felt “there was really no compassion”.
“The manager was very obviously reading from a script,” she said. “I was just another number on their spreadsheet to cut off, and they had no thoughts about how I felt or … things that I’d struggle with.”
A responsible company should provide support by answering as many questions as possible and helping employees with the transition, John said.
“It’s a very emotional, draining process that they’re going through. They’re thinking … what (to) do next. Where can I find a job? What about my family?” he added.
“Any responsible company wouldn’t want to do a retrenchment unless it’s a last resort.”
How companies treat employees on a day-to-day basis, even on their way out, matters, said Au. “The remaining team has to feel that the people who’ve departed have been treated fairly, otherwise their morale will be low.
“(Secondly), if the company has brought on a reputation of being a bad employer, then how would it be expected, when the storm is over, to bring on the next wave of talent?”
Asked if he would invest in a company with irresponsible retrenchment practices, Au did not give a definitive answer, though.
“An unfair practice is reflective of how the executive team is thinking and approaching the business,” he replied. “A management team that doesn’t take care of their employees on the way out is a difficult team to be investing in.”
When pressed by Talking Point host Diana Ser, he said: “Never say never.”
CAN RETRENCHMENT CONTRACTS BE NEGOTIATED?
Ser also wanted to know if employees can negotiate retrenchment contracts. The short answer is no. But according to John, one thing employees may note is that retrenchment payouts come in two parts: the retrenchment benefit and the goodwill payment.
While companies will not make the goodwill payment if you do not sign the contract, they are obligated to pay the (contractual) retrenchment benefits, he said.
Besides this, retrenched employees have been asked to sign NDAs, leaving some like Karen feeling “silenced”.
“I felt anger,” she said, adding that she was asked to sign the NDA by the end of the day. “I really felt that I didn’t have a voice.”
But an NDA is also signed when an employee accepts a job offer, and not only when the parties separate, said John. “It’s very important … to protect (the company from) any unnecessary divulging of the company operations.”
WATCH: HR insider’s secrets — Here’s what companies aren’t telling you about layoffs (7:00)
Non-disparagement clauses, meanwhile, prevent the employee from saying or doing “anything that puts the former employer in a negative light”, said Goh. “The purpose of that is to protect the interests of the employer.”
The “unfortunate reality” is that opting against signing an NDA means putting all sorts of payments promised by the company at risk, said Goh.
Sometimes what’s at stake are ex-gratia payments, … retrenchment benefits as well. So all these would be up in the air if the employee chooses not to sign.”
HOW TO BE PREPARED FOR RETRENCHMENT
With interest rates likely to remain high for the foreseeable future, “technology as a sector will continue to be highly impacted”, warned Au.
When a company isn’t doing well, its budget — a “big part” of which comprises headcount — is one of the places to look at for solutions, he said.
“That strategic decision about what it takes to bring the company safely to the other side of this high interest-rate storm is really the crux of what’s happening.”
Singapore National Employers Federation executive director Sim Gim Guan believes that “in general, the pressure is quite equal across all sectors”.
The experts were unanimous on the need to reskill to stay employable in these times. “Stay on top of your skills, be open to new employers and also be open to exploring and training for new industries,” said Au.
Look out for emerging industries, such as sustainability, said Sim. “If that’s an area of interest, pivot there. I think (that) can’t go wrong.”
Goh encouraged people to use their SkillsFuture credits, “be creative” and network.
For her part, Karen is willing to reduce her asking pay. Grace, meanwhile, has started her own social media agency. “That experience of retrenchment got me thinking (about) what I really want to do in life,” said Grace.
“I do believe that it’s nothing to be embarrassed about because it wasn’t that I was performing badly. It’s just business, and it is what it is.”
Watch this special Talking Point episode here. The programme airs on Channel 5 every Thursday at 9:30pm.
