Before employers implement wage cuts to save jobs, they should consider and implement other cost-saving measures first, according to the latest guidelines on responsible retrenchment practices.
The latest tripartite advisory on managing excess manpower and responsible retrenchment released yesterday lays out the various cost-cutting options employers can consider before retrenching workers.
Employers who want to scale down or suspend business operations because of a short and temporary decline in business activities can consider making adjustments to work arrangements with or without wage cuts, while those with little prospect for the long run may find direct wage cuts and no-pay leave more suitable options.
A Ministry of Manpower spokesman noted that “only a small minority” of all the companies that have submitted notifications on cost-saving measures so far went on to carry out a retrenchment exercise.
Under the tripartite advisory, adjustments to work arrangements without wage cuts include redeploying employees to other areas of work within the company if it is undergoing structural changes.
In such cases, relevant training should be provided.
If there are no other available jobs for the affected employees within the company, another option is to outplace them to suitable jobs in other companies.
Employers can also consider implementing a flexible work schedule, which involves creating a “time bank” of unused working hours while still paying workers their monthly wages.
The banked hours can be “repaid” to the employer later, when business picks up and longer working hours are needed.
On the other hand, adjustments to work arrangements with wage cuts include measures such as offering part-time work, shortening the work week or temporary layoffs.
Employers who are facing dire business conditions that are unlikely to improve in the long term may consider direct wage cuts, but should consult the relevant unions and their employees to reach an agreement before implementing them, the advisory stated.
Responsible retrenchment practices
Good practices for responsible employers when carrying out retrenchments:
1. Provide a longer notice period (beyond contractual or statutory requirements) where possible, either in the collective agreement with unions, or with employees in their contracts of service.
2. Prepare managers on how to deliver the news in a sensitive manner. Affected employees should be informed of retrenchment in person, unless it is not practical to do so.
3. Human resources personnel and union representatives for unionised companies should be present to take feedback and questions from retrenched employees. Employers should also maintain an open channel of communication for further questions that may arise.
4. Give affected employees the time and space to adjust to the news, before asking them to vacate their workplaces.
5. Offer counselling support to affected employees if necessary.
What employers must do under the…