Singapore urges ‘balanced approach’ as mandatory retrenchment benefits could risk existing jobs

The Singapore government has reiterated its preference for a “balanced approach” to retrenchment benefits, pushing back against calls to legally mandate payouts for laid-off workers, amid concerns about business viability and long-term employment.

Responding to a question in Parliament, Senior Minister of State for Manpower Koh Poh Koon said tripartite partners had extensively debated whether retrenchment benefits should be made mandatory, ultimately concluding that guidelines, rather than legislation, would deliver better outcomes.

“We concluded that a balanced approach to protect workers while at the same time providing business flexibility would achieve better outcomes for both workers and businesses,” Koh said, according to Channel News Asia.

The question was raised in the context of whether differentiated rules could be introduced for larger organisations, particularly those with more than 25 employees, to require retrenchment benefits.

Existing norms already widely followed

Singapore’s Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment currently sets out a norm of providing retrenched employees with at least two weeks’ salary per year of service.

Data from the Ministry of Manpower shows broad compliance with the advisory. Between 2020 and 2025, around nine in 10 eligible employees received retrenchment benefits, with roughly eight in 10 receiving payouts in line with the recommended two weeks’ salary per year of service.

These figures, Koh noted, reflect the effectiveness of the current framework without the need for legal compulsion.

Concerns over unintended consequences

Koh cautioned that mandating retrenchment benefits could have unintended consequences, particularly for companies already facing financial strain.

“Imposing strict restrictions such as legally mandating retrenchment benefits may affect the viability of companies who are already in financial difficulties and put existing employees… at risk of also being retrenched,” he said.

He added that additional financial obligations could worsen a company’s situation, potentially leading to further job losses or business closures.

Mandatory retrenchment benefits could also reshape hiring behaviour, Koh warned, making employers more cautious about offering permanent roles.

“Mandatory retrenchment benefits may also result in employers becoming more hesitant to offer long-term or permanent contracts to employees,” he said, reinforcing the government’s position that guidelines strike a better balance than legislation.

Opposition calls for stronger worker protection

Koh’s remarks drew criticism from the opposition Progress Singapore Party (PSP), which said it “strongly” disagreed with the government’s stance. The party argued that mandating retrenchment benefits of at least two weeks’ salary per year of service is increasingly necessary, especially as technological shifts reshape employment dynamics.

“The adoption of artificial intelligence is shifting the balance of power away from workers to employers,” the PSP said, pointing to instances where companies have retrenched staff to boost profitability rather than out of financial necessity.

“The price of flexibility for businesses is often paid by workers,” the party added, calling for stronger safeguards amid economic uncertainty.

As workforce disruptions continue across sectors, the debate highlights the delicate trade-off Singapore faces, balancing worker protection with business flexibility in an evolving economic landscape.