COVID-19: What are some legal issues to consider for business cost-cutting measures?

Vernon Lee
Senior Editor
A man wearing protective mask walks at Marina Bay Sands with the Central Business District seen in the background on 1 April 2020. (PHOTO: Getty Images)

SINGAPORE — With the number of COVID-19 cases in Singapore still on the rise and the outbreak having a severe impact on the economy, many companies across sectors have come under huge cost pressures as business slows significantly. Any cost-cutting measures undertaken by them would directly and indirectly hit workers. Yahoo News Singapore spoke to Muntaz Zainuddin, Partner at IRB Law, about some of the legal considerations for such measures. 

Q1. Can you give us a brief overview of the inquiries that you have received from full-time and contract workers and companies who have been adversely affected by the current economic crisis? 

I see between two and four enquiries on a daily basis for employment matters. Recently, enquiries have almost doubled and most of them relate to companies or employees who are undergoing retrenchment exercises.  There have been some enquiries on how to comply with the Ministry of Manpower (MOM) directives for cost-saving measures as well. I also advise employees and/or companies who are involved in Tripartite Alliance for Dispute Management (TADM) matters for unlawful dismissal in relation to retrenchment.

Q2. For full-time workers who have been laid off, what are the retrenchment or other benefits that they are entitled to?

There are too many myriad of possibilities here as it is largely dependent on the background facts of the employment as well as their contracts. As a general rule, companies are to provide for a longer notice period, job support and severance packages for retrenchment. Due to the COVID-19 outbreak, the advisory has also been that retrenchment needs to be the last resort and companies are encouraged to try other cost-cutting measures first which include changing work hours, temporary lay-offs, freezing monthly variable component entitlements, enforcing no pay-leave as well as salary reductions (not exceeding 10 per cent in most cases).

Q3. For full-time workers who have had their salaries and/or benefits significantly cut, what recourse do they have? What about those workers who have been told to take unpaid leave for an extended period of time?

There is mandatory reporting to MOM if cost-saving measures are implemented for employers who have more than 10 workers. MOM will look into whether this was done fairly. Therefore, it may be best for human resource departments to discuss with lawyers before they take this step as MOM can intervene if this is done unfairly.

Q4. What about the rights of contract staff who have been let go or have had their salaries and/or benefits significantly cut?

The advisory applies to all workers but for contract workers, it may just be that their contracts allow for early termination with notice etc.

Q5. What are some of the key issues and potential sanctions that companies should consider when implementing cost-cutting measures that impact their workers?

Please refer to the answer in Q2. MOM has not informed on what are the sanctions but it is possible that they may be blacklisted or have their foreign quota affected.

Q6. The government has unveiled a slew of COVID-19 related relief measures totalling $55 billion to help businesses, workers and households. How should hard-hit workers and companies respond to these measures?

The reliefs were given to support businesses so that they can use retrenchment as a last resort. For example, the wage support scheme will help defray salary costs. There are also loans made available for small and medium enterprises to tap on which the government is risk-sharing of up to 80 per cent.

Stay in the know on-the-go: Join Yahoo Singapore's Telegram channel at http://t.me/YahooSingapore

Related stories:

COVID-19: Fine, jail for employers who don't allow telecommuting where possible

COVID-19: Firms can hire existing work permit holders from all sectors under temporary scheme

COVID-19: MOM introduces 3 measures to help firms cope during pandemic