Explainer: Retrenchments in Singapore – Why Are They Happening Now?

Just when the world successfully adopted the new normal, the uptick of retrenchments blew away this optimism. Retrenchments in Singapore doubled in 2023 with a total of 14,320 employees laid off, showing an increase of 6,440 compared to 2022, according to the labour market advance for Q4 2023 released by the Manpower Ministry (MOM) on Jan. 31.

The Ministry identified that the restructuring of businesses is the main cause of retrenchments, combined with political tensions and economic uncertainties that intensified the challenge. Moreover, over 10,000 retrenched employees from tech giants including Lazada, Google, YouTube, Amazon, Twitch, Riot Games, and Unilever made matters worse.

While retrenchments might be inevitable from a business perspective, this article will explore why the city-state, despite its strong economy, is experiencing a push in the job market.

Understanding Singapore’s Employment Laws

According to MOM’s guidelines on responsible retrenchment practices, employers who are retrenching any employee must consider strategic manpower demands and inform the MOM beforehand. They should also consult with the union (if unionised) and ensure timely payment of all salaries on their last day while helping them find alternative jobs through outplacement assistance programmes.

For employees facing retrenchment, it is advisable to carefully review the details of the benefits written in their severance letter and employment contract. Employees have the right to request a breakdown of the retrenchment package if something’s unclear about the computation as stipulated in the National Trades and Union Congress’ (NTUC) Fair Retrenchment Framework and the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment.

For instance, one of the latest retrenchment issues in Singapore is the move carried out by e-commerce giant Lazada on Jan. 3 and 5, which left their employees “baffled and anxious” as the decision was made without adequate explanations.

Following this incident, Lazada Singapore issued an apology to the Food, Drinks and Allied Workers Union (FDAWU). The NTUC and FDAWU, however, conveyed their dismay due to the bypass of dialogue with the union prior to the retrenchment. The FDAWU accepted Lazada's apology and agreed to work closely together to ensure a fair and equitable process moving forward.

Reports indicate that affected Lazada employees will receive a severance package equivalent to two week's salary for every year of service. But the union is still advocating for additional benefits, prompting MOM to facilitate ongoing negotiations.

On the other hand, employees at Google’s Singapore office who have been laid off as part of the company’s global downsizing effort were offered severance packages, fortunately, that were deemed comparable to those provided in the United States, as reported by Today Online on Jan. 26.

Layoffs vs. AI

Artificial intelligence, or simply AI, has become synonymous with efficiency, encouraging more companies to adopt this simulation of human intelligence processed by machines. On July 4, CNN reported that tech firms including Chegg, IBM, and Microsoft cited AI as the reason for their freeze in hiring and laying off workers.

Singapore stands out as “the fastest-growing market for AI talent in the Asia-Pacific,” according to LinkedIn data via CNBC on Aug. 20, 2023. This growth is fuelled by the Lion City’s robust digital infrastructure, intellectual property protection framework, and thriving ecosystem of venture capital firms and angel investors.

Last year, Deputy Prime Minister Lawrence Wong confirmed, in a report by Reuters, that Singapore plans to triple its artificial intelligence expert pool to 15,000 as part of its national AI strategy. Part of its framework is to support AI startups through accelerator programmes, supply graphics processing units (GPUs) for researchers, and encourage more companies to establish AI "centres of excellence."

Moreover, NUS Business School Associate Professor Nitin Pangarkar said that layoffs will continue to happen as these are part of the sector, while Professor Lawrence Loh from the NUS believed that AI would not be able to totally replace human labour but workers should be more skilled, he said via a report by Today Online on Jan. 16.