What is Retrenchment?
Retrenchment is the dismissal of employees who become surplus to the needs of the organisation. This could be caused by various factors such as loss of profit, lack of business or financial difficulties, cash flow problem, etc.
Rights for employer
Employers facing financial difficulties as a result of the COVID-19 pandemic may find it necessary to reduce its business costs and expense by amongst others undertaking retrenchments, lay-offs and/or pay-cuts.
Three Basic Requirement for Retrenchment
- There must be a genuine financial impact on the business
- Employers must exhaust other means first before opting to retrench employees such as reducing working hours, reducing or freezing the hiring of new employees, reducing or limiting overtime, limiting employees from working on weekends or on public holidays, reducing employees’ wages or laying -off their employees temporarily.
- In the event, retrenchment of employees cannot be avoided; employers should terminate the services of foreign workers first before considering local employees
However, the Ministry has stated that employers can depart from these principles if it has strong justifications to do so.
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