The Right Way to Reduce Cost & Close a Company in Singapore

Singapore’s Double Hit

These recent years have not been kind to Singapore. Already hit with a heavy blow from the trade war, the Covid-19 pandemic has only added further pain to the economy. Singapore’s export and manufacturing driven economy will likely face additional hardships, as the city-state falls deeper into recession.

MOM Latest Labour Market Report

The Ministry of Manpower released its latest labour market report for Q1 2020. The first quarter has seen 3000 workers retrenched, up from the 2670 seen in Q4 2019. The introduction of the Job Support Scheme (JSS) seems to have slowed the number of retrenched workers, which was expected to be much higher.

With the recent upsurge of cases, MOM is predicting a worsening labour market, as increased restrictions take a toll on various industries. Even with support schemes implemented, businesses are still weighing up measures to reduce costs.

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Difficult Economic Situation – Considering Alternatives to Retrenchment

Leaders of companies have a tough choice to make when deciding which areas they can reduce costs without affecting business operations. Closing divisions of a business can be a complex task.  Before retrenching employees, businesses in Singapore should contemplate the following alternatives to help cope during this difficult period.

  • Furloughs – Temporarily laying off staff for a short period can help you cut costs but also keep your workforce for when business normality resumes. Employers must continue to pay at least 50% of an employee’s gross salary, with the layoff period not exceeding 1 month.
  • Shorter Work Week – Implement a shorter work week, reduced by no more than 3 days a week. This should last no longer than 3 months.
  • Redeployment – Employees can be redeployed to other positions within the company after restructuring.
  • Provide Training – Employers can receive absentee payroll subsidies by enhancing your employee’s skills through training programs.
  • Other Cost-Saving Measures – Outsourcing your HR services can be an option to reduce costs. Allowing professional companies to take care of your payroll and other HR services can save you time and money.

A Guide to Responsible Retrenchment

If your business has been severely impacted and retrenchment is the only option, you should consider these things before exercising the process.

  • Be Fair – Ensure your decision is solely based on your business’ future. Do not discriminate against employees or groups in making your conclusion but evaluate their ability to contribute to your company.
  • Take a Long-Term View – Analyse your manpower needs if business returns to normal. Have a long-term view and reduce the need to recruit and train new employees in the future.
  • Treat Employees with Dignity – Understand that this is a difficult time for your employee. Always treat terminated staff with the utmost respect to reduce negativity and protect your employer branding. Try to provide a longer notice period when possible.
  • Complete Payment – On the final day of work, ensure all salaries, unused annual leave, and other outstanding payments are compensated.
  • Provide Outplacement Service – Help your affected employees transition into alternative jobs. Offer them outplacement service assistance so professionals can help update their resume, prepare them for interviews, and connect them to new positions. Outplacement is essential for your employer brand and strong company culture.

The Silver Lining – Better Data in Comparison to the Financial Crisis & SARS

Although the current situation seems to be all doom and gloom for Singapore, we can take heart in the fact that the situation was worse during the financial crisis and SARS. Retrenchment numbers during the first quarter of 2009 were at 12,760, while overall unemployment during SARS reached 4.8%, both significantly higher than current levels.

Some places in Asia have seen a drastic improvement in controlling the virus and a gradual return to normalcy. With Singapore enforcing stronger measures, we can expect more short-term economic pain but an improved control of the coronavirus.

When the business situation improves Links International can help find the best talent to help your company. Learn more about our award-winning recruitment services here.

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3 Key Takeaways

Explore Alternatives to Retrenchment

Before exercising retrenchment, different measures can be considered. MOM has suggested short-term cost-saving measures like temporary layoffs, shorter work weeks and redeployment as alternatives. Outsourcing functions like payroll is another viable option.

Help Affected Employees

Provide an outplacement service for terminated employees to transition into a new job. Provide them with professional help in updating their resume, interview preparation and connection to new job opportunities. Diminish animosity and protect your employer branding.  

Prepare for an Improved Future

Although the situation in Singapore is still uncertain, other places in Asia like Hong Kong have seen control of the virus. As circumstances improve businesses will have to prepare and look into hiring.

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