19 August 2020

Singapore: Extending Jobs Support may only delay the inevitable - Retrenchments


Amarjit Kaur
Partner | Singapore

Given that Singapore’s economy is now expected to shrink from 5 per cent to 7 per cent in 2020, with a record high second-quarter year-on-year contraction of 13.2 per cent, retrenchment numbers are expected to continue to soar.

Total employment in the second-quarter declined by 121,800, which is the largest recorded quarterly decline in Singapore.

Retrenchments during these three months more than doubled to 6,700 from 3,220 in the first-quarter, and is almost triple the retrenchment rate Singapore witnessed over the same period last year.

Retrenchments in the second-quarter rose across broad industry sectors, most significantly in retail and air travel.

This trend of rising retrenchments looks set to continue as the ripple effect of COVID-19 wipes out years of economic progress and continues to undermine business and consumer confidence in the face of an uncertain future.

Jobs Support Scheme

Can the extension of the Jobs Support Scheme (JSS) announced by Deputy Prime Minister (DPM) Heng Swee Keat in his Ministerial Statement on Aug 17 prevent, or at least defer, further retrenchment exercises?

DPM announced a calibrated extension of JSS for up to 7 months covering wages until March 2021, based on the projected recovery of various industry sectors, with aerospace, aviation and tourism industries receiving the largest percentage of JSS support.

The extension of JSS adopts a more modest and targeted sectorial approach, demonstrates flexibility in adapting to the evolving pandemic.

DPM Heng indicated that it would be fiscally unsustainable to extend the JSS at the current levels of payout, which have seen over S$16 billion being disbursed to 2 million workers in over 150,000 companies.

JSS measures, initially announced in the Unity Budget in February, and expanded over the remaining three Budgets, were generally well-received by companies as they provided timely assistance in defraying the direct cost of employee salaries during the pandemic and has helped them retain staff to the extent possible.

Retrenchments are already occurring

From a timing perspective, one wonders if this announcement of the extension of the JSS beyond August 2020 comes a little too late for companies which have been battling for survival the last few months?

In the Fortitude Budget announced on May 26, JSS was extended for a final month to cover August 2020, to be paid out in October 2020.

In anticipation of the JSS wage subsidy grinding to a halt in August 2020, and given that companies often strategically plan manpower pipelines in advance to account for notice period pay, it is conceivable that certain companies may indeed have already implemented salary reductions and conducted retrenchment exercises by calculating backwards from the anticipated end of JSS support for August 2020 wages.

This leads us to question whether the announcement of the extension of JSS a month or so earlier would have made a difference in preventing retrenchments, or would it have just kicked this retrenchment can down the road?

Responsible Retrenchment

Notwithstanding temporary economic buffers in the form of the extended JSS wage subsidies and other governmental support measures, mass retrenchment looms large on the horizon. Industry observers have predicted a spike in retrenchments once JSS comes to an end.

It is therefore critical to devote attention to not only minimising retrenchments, which can be stemmed only to a limited degree, but more so to ensure that where such retrenchments are inevitable, they are carried out fairly.

To this end, the Government and Tripartite partners have repeatedly exhorted companies to implement retrenchment as a last resort and to conduct such exercises responsibly.

DPM Heng announced an upcoming revision to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment to assimilate the National Trade Unions Congress’ (NTUC) Fair Retrenchment Framework (FRF) released on Aug 12.

The FRF is premised on three core pillars – protecting the Singaporean core (Singapore citizens and permanent residents); preserving jobs; and providing job support. The FRF is laudable in its drive to protect jobs and preserving the Singaporean core.

This complements the spate of recent actions taken by the Ministry of Manpower (MOM) and the other Tripartite partners that demonstrates greater scrutiny of unfair hiring and firing practices, and a harsher stance taken towards holding errant employers accountable.

In June 2020, Manpower Minister Josephine Teo announced in Parliament that employers who disguise retrenchments may be penalised by having work pass privileges suspended and JSS support withdrawn.

Given the extension of JSS till March 2021, this ongoing threat of punishing employers for attempting to disguise retrenchments remains an active deterrent.

More recently, a mere five days after the NTUC proposed its FRF, the unions were given an opportunity to put the FRF into action by boldly halting an unfair retrenchment exercise undertaken by Eagle Services Asia.

The unions probed into key details of the planned retrenchment and ultimately brokered an outcome where Singaporeans to be retrenched dropped from 56 per cent to 44 per cent, with a fair compensation package secured for retrenched employees.

COVID-19 has threatened the livelihoods of business owners and employees alike.

Given the bleak reality that retrenchments look set to rise, the increased oversight and crackdown by the Tripartite Partners on sharp employment practices to safeguard the interests of our workforce is welcome.

Continued Support For Jobs

Minimising retrenchments goes hand in hand with ensuring that displaced employees are able to find suitable alternative employment to swiftly get back on their feet

A multi-pronged approach has been adopted to help workers secure employment, with strong government support for upskilling and reskilling to develop core competencies, and for the creation of new job opportunities.

Growing industry sectors identified by DPM as biomedical sciences, financial services, infocomm technology, public health and long-term care will need more workers.

Efforts are being made to connect job seekers with opportunities through redeployment and the setting up of 24 satellite career centres in the heartlands for career matching and advice.

The recently created National Jobs Council has demonstrated some success by curating 92,000 committed public and private opportunities, with 24,000 job seekers actively placed into these opportunities by end-July.

Similarly, some 10,000 local residents have found jobs through the Workforce Singapore (WSG) career matching services in the first half of this year. It is commendable that the number of placements is similar to that in the same period last year, given the significant adverse impact of COVID-19 on the labour market.

Jobs Growth Initiative

Significantly, DPM Heng introduced the new Jobs Growth Initiative (JGI) geared at supporting the government’s efforts to create new jobs for workers, with a sharp focus on local workers and mature workers.

S$1 billion was committed to support firms that increase their headcount of local workers over the next six months.

The government has committed to co-pay up to 25 per cent of the salaries of all new local hires for one year, and up to 50 per cent for workers over 40, subject to a cap to be announced.

The clear priority shining through the JGI and the amalgamation of the NTUC’s FRF into the Tripartite Advisory is safeguarding the interests of the Singaporean core in hiring and firing decisions.

While protecting Singaporeans’ job security is clearly critical in this crisis, it is undeniable that Singapore’s meteoric rise to success on the global stage is attributable in part to our carefully curated efforts to court multinational companies and the best and brightest foreign talent.

Foreign investments, companies and talent have been at the cornerstone of our exponential growth as a nation.

They remain important components of Singapore maintaining its competitive edge in Asia and on the global stage in the long-term and in the post-pandemic world order.

While retrenchments may be inevitable, a delicate balance should be struck between protecting job security, and yet retaining the vibrancy and diversity of our workforce, which makes Singapore one of the most competitive and effective economies in the world.

This article was first published by CNA here on 19 August 2020.

Amarjit Kaur Partner, Withers KhattarWong* | Singapore

Category: Article