Redundancy guide: payment, entitlements & advice
Redundancy happens when your employer dismisses one or more employees from their jobs due to changes in the company. According to the Ministry of Manpower (MOM), business restructuring doubled retrenchments in the fourth quarter of 2022.
Genuine redundancy or retrenchment can happen due to changes in company structure, technological advancements, budget cuts, and even marketplace rebalancing. Whatever the reason, becoming redundant employees affects your emotional and financial well-being. From the different types of redundancies to advice on coping with it, this guide aims to help you understand everything about being made redundant.
- Types of redundancies
- Legal aspects of redundancy
- Signs of redundancy
- Preparing for redundancy
- Ways to cope for redundant employees
- Redundancy and finances
- Career change options
- Redundancy and age
- Redundancy and disability
- Redundancy and maternity leave
- Conclusion
- FAQs
Types of redundancies
Voluntary redundancy
This happens when an employee volunteers to be redundant. Since the employee chose this option, the consequence is not as painful. It may be due to reasons like wanting to retire early. It could also be about finding another work opportunity elsewhere.
Compulsory redundancy
Compulsory redundancy usually happens when a business faces financial difficulties. This may happen when there is a change in the number of staff, or if a function or a department is eliminated.
If it's the former, wherein the organisation has to reduce the number of personnel, management decides through a fair and transparent selection process. This involves a criterion based on disciplinary and performance records. Also included are skill sets, aptitude, and qualifications. If the compulsory redundancy pertains to shutting down an entire department, then there won't be any need for a selection process.
Selective redundancy
Deciding which employed individual should be given notice is a challenging task. Selective redundancy involves neutral and measurable factors that are not discriminatory. This includes attendance history and punctuality, skill, experience, and work performance.
Collective redundancy
This occurs when 20 or more employees are made redundant within 90 days. An example of collective redundancy is when Twitter CEO Elon Musk laid off at least 200 of his staff.
In such cases, employers must follow a redundancy consultation process to accommodate the concerned personnel. Bargaining takes place to reduce the number of employees declared redundant. It can also be a means to avoid any dismissals altogether.
Legal aspects of redundancy
Redundancy pay
Responsible redundancy or retrenchment includes giving fixed-term employees their redundancy pay. This compensates you for your loss of employment. The compensation amount will depend on your employment contract. In its absence, employees will have to negotiate for it.
In Singapore, the Employment Act (EA) states that an employed individual who has been in continuous service with an employer for at least two years is entitled to redundancy pay or retrenchment benefits upon being dismissed. Employers can also still provide benefits to employees with less than two years of service out of goodwill as an ex gratia payment.
Consultation process
Here's a piece of redundancy advice: companies must take the time to weigh their options first. This includes reviewing manpower needs and informing the Ministry of Manpower (MOM). Employers must also ensure that all related decisions reflect no discrimination against employees. Companies with at least ten employees retrenched have to inform MOM.
Discrimination and redundancy
There are current protections set to prevent workplace discrimination. Employers cannot discriminate a person based on age, nationality, gender, marital status, pregnancy status, caregiving responsibilities, race, religion, language, disability, and mental health conditions. It's prohibited by law to subject employees to redundancy based on those criteria.
Unfair dismissal
The dismissal of an employed person can happen with or without notice. Redundancy may be a valid reason, but the act itself can be deemed unfair or wrongful. For instance, if it was based on discriminatory grounds, it's an unfair dismissal. Same goes for withholding benefits or entitlements.
Signs of redundancy
Changes in company structure
Redundancy is almost expected when significant changes in your organisation's structure may affect employees. These changes may include introducing new processes, wherein your role is "no longer required.” Installing the latest equipment to execute specific functions previously done by staff is also a sure sign. It can also be a general restructuring due to an economic downturn.
Decline in business performance
Maintaining cash flow is crucial for business survival. When the company's performance starts to decline, profits suffer. It could lead to cost-cutting and reducing the headcount. This will result in laying off employees to reduce cost in operations.
Merger or acquisition
Look out for possible redundancies when another organisation buys or merges with your company. When this happens, roles can duplicate. This can lead to redundancies. Too many people in a particular department can also lead to a layoff.
Technological advancements
Businesses are taking advantage of rapid technological advancements. Different types of work can now be done faster with the help of improved devices and software. As more and more companies adopt digital technologies, their staffing requirements will decrease. It's even predicted that around 12 million jobs are likely to become redundant over the next five years.
Take note: Productivity and innovation are key components of business continuity. When a corporation begins to rely on automation, expect reduction in headcount.
Preparing for redundancy
Understanding your rights
There are no overarching laws that protect laid-off workers. If you're advised about redundancy, review the terms of your employment contract. The details stated on the legal aspects of redundancies, and finances will inform you about your rights. Receiving a severance package is one example.
Updating your CV and skills
Starting over again in your career doesn't have to be considered a failure on your part. After enough downtime, dedicate your time and attention to training, retraining, or upskilling. It is also an opportunity to update your CV and include the new skills you may have learned from your recent role. You can highlight responsibilities and achievements at your previous position. This can further impress your prospective employers.
Networking and job searching
Before reaching out to industry professionals, take a moment to process your current state. You can use this time to reevaluate your career goals first. Remember: being open to change is one way to welcome opportunities. This is important when taking a broader approach to your post-redundancy job search.
(Read more: 5 Job Search Strategies to Help You Discover Your Ideal Career)
Ways to cope for redundant employees
Impact of redundancies on mental health
Redundancies can trigger strong emotions, stress, and negative thinking. It can leave you feeling angry, embarrassed, guilty, and lost. It's not an ideal place to be in, especially if you have many personal responsibilities. Coming to terms with the situation can help you understand how much redundancy can affect your mental health. These coping strategies can help you start your recovery.
Coping strategies for mental health
Keeping a positive and healthy mindset after being let go can be challenging. But it's possible once you've had enough time to reflect on what happened and how you feel about it. From there, start to acknowledge your need for emotional support. Coping with a stressful situation can be manageable with the help of other people. You can start talking to other people about it to move forward.
Seeking professional help
Managing the aftermath of redundancy can be easier with the help of a professional. Consult a mental health practitioner to help you bounce back. Professionals can help you regulate your emotions. They can also provide you with the mental tools you need to cope better.
Seeking support from family and friends
Seeking support from family and friends is also a good way to cope with layoff. After all, nobody knows you better than the people closest to you. Go out and spend time with them on weekends. Let your family and friends help you rebuild your confidence. You don't have to recover from the aftermath of redundancy on your own.
Exploring new opportunities
Being retrenched isn't the end of the world. It may take a while for you to recover, but keep in mind that there are other opportunities for you. Once you realise this, you can start to feel positive about getting back to work again. It can also be a time for you to network, upskill, and discover other career options.
(Read more: What to Do If You Are Retrenched: 7 Tips to Get Back on Your Feet)
Redundancy and finances
Managing finances during redundancy
Redundancies can and will affect your financial well-being. Managing your finances and creating a budget is a must during post-redundancy. You can start by reevaluating certain expenses and taking stock of your finances. Which expenses can you minimise? How much of an emergency fund do you have? This can help you make rational financial decisions even amidst losing your job.
Claiming redundancy pay and benefits
When you're laid off, you can receive redundancy pay and benefits. This is to compensate you for the loss of employment. Employees in Singapore with at least two years of service to the company are eligible for benefits. Those with less than two years of service can be granted an ex-gratia payment. How much redundancy pay is expected? The amount will vary per the contract between employer and employee. Still, the prevailing norm is to pay a redundancy benefit between two weeks to one month's salary per year of service.
Seeking financial advice
You can seek financial advice to understand your funds after redundancy. There are many financial support services available for people going through financial difficulties. It's best to take advantage of this option to make sure you're on the right track to securing your finances.
(Read more: Lost or Changing Your Job, and Worried About Money? Here's a Guide)
Career change options
Your career can and will bounce back from redundancy. It can push you to enhance your career through a different path. You can take it as an opportunity to review your current career goals. You can also learn new skills and look for new or related roles and industries to explore.
Keep in mind that life doesn't stop when you lose your job. Another piece of redundancy advice: take advantage of it. You can turn it into an opportunity for positive change. It is the best time to improve your life by finding what motivates you to do and be better. Here are a few possible steps you can take.
Assessing your situation
While redundancies can be daunting, it can also be a chance to reevaluate. Take stock of the skills you've developed and mastered as well as your years of experience in your field. Determine if they are still aligned with your values and goals? Whether you want to stay in the same industry or are curious about taking on new challenges, identify potential obstacles as well.
Being laid off is not a personal reflection of you, your skills, or the value you brought to work. You're not a failure. Take some time to assess your situation and its effect on your life. This can help you approach your new path confidently.
Exploring new career paths
We are always destined for greater things. Exploring new career paths after redundancy is more than possible when you set your mind to it. You can even look at it as an opportunity to reinvent yourself. Look at a related industry or position that you've always wanted to explore. You can use this time to start reevaluating your current skill set and interests. You can also look into transferable skills, and focus on networking and building connections.
Developing your career change strategy
Once you decide to pursue a new career, you need a strategy to help you achieve your new goals. Having realistic objectives will lead you to an action plan with measurable milestones. It's important to stay grounded and practical — don't rush. This is also the time to identify resources, your capacity, and a support system that can lend you a hand in your journey.
(Read more: Top Questions to Ask Yourself When Making an Important Career Change)
Reskilling and upskilling
With new goals in mind, identify if there are any skill gaps you need to address or opportunities for growth. You can take this time to invest in yourself by reskilling and upskilling. Reskilling lets you learn a new skill, while upskilling improves your existing skills. It's like a backup to your current skills.
Kick off your upskilling and reskilling journey by checking online resources for courses. You can also look for a potential firm who offers to reskill and upskill. This indicates that they can help you hone and develop your career.
Navigating the job market
Putting yourself out there again after being let go can be difficult. It's best to assess your situation first and explore new career options. You then develop a clear strategy and reskill or upskill. This prepares you to embark on a new journey in the job market.
You can start familiarising yourself again with recruitment trends. Current job market demands can follow. Next, you can polish your resume and cover letter. Finally, prepare for interviews and negotiations with potential employers.
Redundancy and age
You should be aware of possible areas of discrimination, like age. This is essential to establish if there is a genuine redundancy situation. Include this in your redundancy checklist.
Age discrimination is a prevalent problem experienced by both younger and older generations. It is unlawful if the redundancy selection process involves the employee's age. The Retirement and Re-employment Act (RRA) has since adjusted the minimum retirement age to 63.
(Read more: 5 Ways to Beat Age Discrimination in the Workplace)
Redundancy and disability
Being laid off because of your disability is prohibited. Article 27 of the United Nations Convention on the Rights of Persons with Disabilities (CRPD) states that persons with disabilities can work with others without discrimination.
Reasonable adjustments and accommodations must also be provided to persons with disabilities in the workplace. In the event of a wrongful dismissal based on disability, the dismissed worker should seek legal advice
Redundancy and maternity leave
Pregnant employees have maternity protection against retrenchment This is possible if you've been employed with the same firm for at least three months. You're still entitled to maternity benefits if your employer decides to end your employment during your pregnancy.
Conclusion
Redundancy can happen for different business reasons. There are also different types of redundancy that companies might employ depending on the circumstances. Therefore, it is important to know redundancy's legal aspects, including but not limited to your redundancy pay, the redundancy consultation process, and discrimination. Preparing for it means understanding your rights, reevaluating your career goals, and allocating your time to training or learning new skills.
Going through redundancy is tough, but it's not the end of the world. Yes, it can have significant effects on your mental health, but there are coping strategies available. You can seek support from family, friends and even get professional help. It's also important to understand how to manage your finances or approach financial support services if the redundancy has put you in a difficult financial situation.
Keep in mind that redundancy is not career-ending. You can take many steps to bounce back. After you assess your skills and professional experience, you can explore new industries and roles. Setting realistic goals and identifying opportunities to grow are also necessary before you navigate the job market. There are plenty of great opportunities out there that can still turn your career around.
FAQs
- What is redundancy?
Redundancy happens when an employer dismisses one or more employees from their jobs. This is due to significant changes in a company. Redundancy examples include business restructuring and integrating new technology. The integration of systems and processes is also possible. Budget cuts, or a reduced demand for a particular skill or job, may also be considered.
- What are my rights during redundancy?
Every employee qualified for redundancy must be dismissed fairly and responsibly. You are eligible for redundancy pay and benefits when you're made redundant. Being compensated for the loss of employment is your right. Be sure to check if there are any errors in the redundancy requirements or checklist.
- How do I cope with redundancy?
Dealing with redundancy can be easier with the right support system. You can seek professional help or support from family and friends. It's important to talk about what you're going through so you can move forward. Focus on moving on rather than looking back.
- How do I claim redundancy pay?
If you're employed with at least two years of service to the company, you are eligible for benefits. Those with less than two years of service can receive an ex-gratia payment. The amount will vary per contract between employer and employee.
- What are my options after redundancy?
Navigating life after redundancy doesn't have to be stressful. Finding new employment is also easier with JobStreet, where you can create a profile or download the app on both Apple and Android and search for jobs. You can also visit their Career Advice page for expert insights and career advice.
- Can I seek legal advice during redundancy?
Yes, you can seek legal advice during this difficult time. Getting redundancy advice can help you exercise your rights to pay and benefits. This can also be a technique for you to learn how to navigate the emotional and financial impact of redundancy.
- How do I prepare for redundancy?
Preparing for redundancy should first involve understanding your rights. You can then update your CV and skills. Networking and job searching is also an option, as well as seeking financial advice. These steps are necessary to secure your well-being and future career.
- How does redundancy affect mental health?
It can cause high levels of stress and even depression. Those dismissed are prone to suffer from low self-esteem, focusing on past failures and losses. Dealing with the grief of losing your job is not easy. It can be a struggle to bounce back, but recovery is possible with coping mechanisms in place.
- How can I reskill and upskill for a new career?
Reskilling and upskilling for a new career can multiply your opportunities. You can attend conversion programmes for reskilling. Signing up for online courses is also an option for upskilling. Both will increase your chances of being hired.
- What are my retirement options during redundancy?
The minimum retirement age is 63. With the Retirement and Re-employment Act, employees who turn 63 can consider re-employment until age 68. Before you take voluntary redundancy to retire, prepare for the financial impact. This will involve your pension, benefits, and how much redundancy pay you'll receive.
