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Layoffs: Everything you need to know about retrenchments, including in Singapore

Worried about being laid off, or retrenched? Find out what typically happens when a company decides to lay off employees, including in Singapore.

Two employees caught in a layoff.
Find out what typically happens in a layoff exercise, when an employee gets retrenched. (PHOTO: Getty) (Thirawatana Phaisalratana via Getty Images)

SINGAPORE — Layoffs are a dreaded concern for many employees.

According to estimates from the Ministry of Manpower's (MOM) labour market advance release for the fourth quarter of 2023, the number of retrenchments more than doubled in 2023 to 14,320 from 6,440 in the previous year. As downside risks in the global economy remain, MOM cautioned that business reorganisation or restructuring may lead to further retrenchments and higher unemployment rates going into 2024.

If you are feeling anxious over the possibility of being laid off from your company, Yahoo Finance Singapore has put together a basic guide that will give you a sense of what to expect.

How do companies decide who to lay off?

The decision-making process behind a company's decision to retrench employees is often multi-faceted and varies from one organisation to another. Such decisions may be strongly influenced by a combination of strategic, financial, and performance-related factors.

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Companies may also assess various criteria in employees such as job performance, skills alignment with organisational goals, and seniority. Economic conditions, market trends, and the specific circumstances prompting the need for layoffs may also play pivotal roles in shaping these decisions.

"Common reasons cited by companies for retrenching employees are cost-cutting to remain viable, restructuring due to shift in business focus or technology, mergers and acquisitions (M&A) or outsourcing," said Kathleen Seah, Director of Human Capital at investment management firm PhillipCapital. Seah has over 20 years of human resources (HR) business partnership and leadership experience across various sectors including telecommunications, public transport, cyber-security and financial services.

"Some companies may decide to retrench employees who are unable to be redeployed to other roles that are still required by the company, possibly due to limited skillsets or higher salaries. Some companies may choose to let go of newer employees who have yet to develop strong domain knowledge of the company," said Seah.

Interestingly, PhillipCapital has adopted a policy of no retrenchments, resulting in a track record of no retrenchments since the company's founding in 1975.

Can a company lay off and hire at the same time?

Although it may seem oxymoronic given the typical macroeconomic justifications for retrenchments, it is quite a common practice for companies to simultaneously lay off and hire at the same time, or within a short period of time.

"It is possible and fairly common as the employees who were laid off may be unable or unwilling to fill the other job openings in the company. For example, an employee in IT support may not be able to perform the role of business operations effectively.

"This is often due to the incompatibility of the employees' skillsets and the requirements of the job openings. Such incompatibility may be real or perceived. It can also happen when there is a mismatch of salary expectations between the redundant positions and the job openings," said Seah.

Distinguishing between being laid off and being fired is important for individuals navigating the job market.

Does restructuring mean layoffs?

Although the terms "restructuring" and "layoffs" have been commonly used within the same context, carrying out a restructuring exercise within a company doesn't always lead to layoffs. Restructuring is a broad organisational term that encompasses various changes, and while it can involve layoffs, it does not necessarily equate to them. Restructuring efforts may involve streamlining operations, adjusting reporting structures, or reallocating resources. Companies may pursue restructuring for reasons beyond cost-cutting, such as enhancing efficiency, pursuing new markets, or responding to shifts in industry dynamics.

Is being laid off the same as being fired?

Distinguishing between being laid off and being fired is important for individuals navigating the job market. Being laid off typically results from organisational changes, economic factors, or restructuring, where the employee's role is deemed redundant. On the other hand, being fired generally implies termination due to individual performance issues, policy violations, or other reasons specific to the employee's conduct or capabilities.

"Contrary to beliefs, poor performers in the workforce who are in functions and roles that are essential to the business are usually not considered as part of the rightsizing exercise. If a poor performer is let go and the role is to be replaced by another person, we would not consider that process as a layoff," said Jaya Dass, Managing Director of Permanent Recruitment at recruitment agency Randstad Singapore.

What happens if you get laid off?

Getting laid off can be a scary and confusing experience, but understanding the subsequent steps can help mitigate uncertainty. If you find yourself on the receiving end of such bad news, you should note that most companies offer laid-off employees severance packages, including financial compensation, continuation of benefits, and outplacement assistance.

You may wonder whether it is wise to inform potential future employers about being laid off. There is often no shame in being retrenched over factors that you have no control over.

According to Dass, once the decision to retrench has been made at the management level, human resources and corporate communications typically initiate the process of informing the affected employee.

"Before speaking to the impacted employees, the management team and human resources need to be prepared with the information to communicate, including the severance package, supporting documents and agreements. The information package should include details such as severance pay, cash bonus, equity, notice period, paid leave balance, health and wellness benefits, career support, assistance programme, email access as well as visa support for those who need it.

"Some companies also provide impacted employees with free computers and access to outplacement programmes to support their career search," Dass explained.

Dass added that retrenchment processes tend to differ from company to company and the scale of the retrenchment exercise. While she believes it is always best to inform the impacted employees in person, some organisations may not be able to extend the same to remote workers.

"During these challenging times, the well-being of all employees should always be prioritised. It is good practice for companies to conduct check-ins with impacted employees a few days after the announcement to receive feedback and realign on career support if needed," said Dass.

Affected employees are advised to engage with human resources to clarify the terms of the layoff. There is also the option to explore potential retraining or reskilling opportunities as well as access to support services during the transitional period.

Should you tell your future employer you got laid off?

You may wonder whether it is wise to inform potential future employers about being laid off. There is often no shame in being retrenched over factors that you have no control over. When it comes to informing future employers about being laid off, Dass believes that honesty is the best policy.

"Transparency and honesty are good traits to demonstrate during a job interview to explain the gaps in your resume. Furthermore, retrenchment exercises are beyond the employee's control as they can be good workers who have been caught in an unfortunate situation.

"What's more important is that the employees demonstrate a motivation to upskill and diversify their skills so that they can be more agile and adaptable in their careers," said Dass.

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