Time to consider retrenchment benefits

May 18, 2012
Singapore Democrats

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Singapore Democrats

With the economy starting to show increasing signs of a slowdown, it is time that we start thinking about introducing help for those who are retrenched. Last year, the Ministry of Manpower reported 9,990 workers were made redundant, an increase from 9,800 in 2010.

The world’s economic outlook is uncertain at best with the US’ non-manufacturing index falling to a four-month low in April and new orders dropping to their lowest level in half-a-year. 

And with Europe’s economic troubles deepening as well, business sentiment in Singapore is commensurately weak. This means that companies here will be looking to cut back, resulting in more lay-offs.  $CUT$

Many Singaporean workers will find themselves out of a job because of developments half-a-world away, completely out of their control. They play the game by the rules: work hard, pay their taxes, and contribute to the economy. But through no fault of theirs, they suddenly find themselves out of a job. 

Most of these workers are not covered by retrenchment insurance. In addition, they are usually workers on the lower end of the economic scale.

When they are retrenched, their bills continue to pile up. Without income and with groceries to buy, children’s school fees to pay, and utilities bills to shoulder, families come under intense financial pressure. Such problems often result in family conflicts.    

To help households affected by layoffs tide over, our economic system should introduce a retrenchment (or unemployment) benefits scheme where the state provides temporary financial relief. 

The SDP has proposed that the Government pays retrenched workers not covered by their employers 75 percent of their last drawn salary for the first six months. This amount will be reduced to 50 percent during the following six months, and further reduced to 25 percent in the third six months. 

The payments will stop once the individual is re-employed. They will also cease 18 months after one’s retrenchment if the individual is still not employed by then. This will prevent a culture of welfare dependence from taking root. A cap will also be placed on the amount that any retrenched worker is paid.

Furthermore, under the SDP’s proposal each worker will be allowed to reject only up to three job offers in the one-and-a-half years of the entitlement programme following which, as stated, the retrenchment benefit ceases. 

Such a scheme serves the dual purpose of provide financial support to families during moments of crisis (“shock absorbers” as some countries call them) without creating a dependency culture where people find it easy to stay home and collect welfare checks. 

Additional measures can be implemented to prevent abuse of the system such as excluding:

 

  • part-time and temporary workers,
  • workers who cannot show that they were retrenched,
  • individuals who are relieved of their work due to misconduct.

 

Opponents of this idea often cite that such an arrangemment removes the willingness on the part of workers to work. This will be addressed in another post.