Managing HR Costs in a Global Pandemic: New Mandatory Reporting to the Ministry of Manpower on Costs-Saving Measures

In the current challenging business climate, many businesses are looking for ways to manage and reduce cost. HR plays a big role in these boardroom conversations where headcount reduction and pay cuts are the obvious cost-savings measures under discussion. Employers in Singapore have also generally enjoyed much freedom in commercial decisions impacting employees – up to now.

The Singapore government and key stakeholders have recently jointly updated the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (“Advisory”) in view of the evolving COVID-19 situation on 11 March 2020. Apart from offering creative and constructive measures which HR can adopt as an alternative to retrenchment.

With effect from 12 March 2020, employers are required to notify the Ministry of Manpower (MOM) if they implement any cost-saving measures during this period that affects the employees’ monthly salaries, and indicate that they have done so fairly. The government's purpose is to encourage responsible implementation of such measures, prevent downstream salary disputes, and allow the MOM to monitor the scope and scale of such measures. This would also enable stakeholders like the National Trades Union Congress and the Singapore National Employers Federation to step in to provide the appropriate support to both employers and employees when needed. This requirement applies to employers with 10 or more employees and is intended to be a temporary measure, until the economy recovers.

The MOM will now be able to scrutinise cost-cutting measures undertaken by organisations in the same way that it has been scrutinising retrenchment exercises. Government scrutiny may mean that organisations will have to exercise more scrupulous judgment in undertaking cost-cutting measures and work out a more meticulous strategy demonstrating the consideration that they had paid to their employees' livelihood. It remains to be seen whether and how much the MOM will go in terms of influencing or inhibiting decisions of the organisation.

The Advisory also makes the creative suggestion of implementing a “timebank” of unused working hours accumulated in the period of business slowdown, which can be used to offset the increase in working hours in subsequent periods. In offsetting future overtime pay, the employee (or union if company is unionised) and employer may agree on the rate at which the accrued hours are to be valued. The aim of this approach is to safeguard current salary levels so that employees do not experience a drop in income. Employers who wish to implement the timebank need to seek the support of the employees (and union if company is unionised) and thereafter apply to the Commissioner for Labour.

This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. We will continue to monitor the situation and provide updates on any changes as soon as these are communicated to us. Please contact our lawyers if you have any specific queries.

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