Here Are 4 Severance Benefits You Can Offer When Cash Is Tight

Laying off your team is one of the most heart-breaking decisions to make. As companies wrestle with the uncertainties brought about by the COVID-19 pandemic, some are forced to the last resort: retrenchment.

If your company is feeling the squeeze from the virus, here’s how you can still offer an attractive severance package to do your employees right.

In Singapore, all employees who have been with the company for at least 2 years are eligible for severance pay. The amount of retrenchment benefit is not dictated, but the prevailing norm is to pay between 2 weeks to 1 month’s salary for each year of service, according to the Ministry of Manpower (MOM). This depends on the company’s financial position, and the industry norm.

For unionised companies, where the amount of severance pay is stated on the collective agreement (between the trade union and the company), the norm is one month’s salary for each year of service. 

Employees with less than 2 years of service can be given an ex-gratia payment, which is a cash payment provided in gratitude without legal or contractual obligation.

CPF is payable on ex-gratia payments, but not retrenchment benefits as they are considered capital receipts. 

#1 Allow Employees To Keep Their Company Laptops 

Apart from an attractive severance pay, another benefit could be to let employees to keep company-issued devices such as laptops and mobile phones. As companies grapple with economic uncertainties, many have imposed a hiring freeze and it is likely to take a while for recruitment to resume. Thus, it might make more sense for companies to allow retrenched employees to keep their company devices, given that the next employee to be reusing such devices will not be anytime soon. 

Such a retrenchment perk is hinged on various considerations, such as whether company equipment is leased and your employee turnover rate. If the employee turnover rate is high, it is less logical to have your employees to keep company assets. You would also want to have the standard IT protocols in place to mitigate security risks, such as erasing sensitive company data or revoking access to accounts. 

Airbnb, for instance, has allowed 1,900 of its retrenched employees to keep their Apple laptops, citing that ‘a computer is an important tool to find new work’.

Read Also: 5 Ways To Boost Your Employees’ Morale – And Why It’s Important To Do So

#2 Offer Job Placement Support 

Letting employees go in the midst of a recession can be an unpleasant transition. Given the substantial impact that a layout can bring on your employees’ lives and livelihoods, providing job placement support can reduce the anxiety of employees and help them survive this career change.

Such assistance can come in the form of helping staff find suitable new jobs and counselling services such as coaching and skills upgrading. It was what Starhub offered to 300 staff affected by job cuts in a restructuring exercise back in 2018. Companies can work with unions, Singapore National Employers FederationWorkforce SingaporeNTUC’s U PME Centree2i or external outplacement agencies to help laid-off employees seek for alternative employment.

Alternatively, you could tap on community-led initiatives, such as this public database that collates details of start-up employees laid off due to COVID-19, supported by various VC firms. Airbnb has also launched their own alumni talent directory to help their leaving employees find new jobs, on an opt-in basis.

Read also: Working From Home: 5 Ways To End Your Remote Workday

#3 Continue To Cover Health Insurance For The Interim Period

Dealing with retrenchment is extremely challenging. One has to cope with a mix of overwhelming emotions and the sudden loss of a steady income. Above all, your employees have to juggle this amidst a global health crisis. One way you can help relieve the burden is by extending their health insurance coverage. This is especially so for your employees with Work Permit and S Pass holders, who might not have gotten their own health insurance.

If you have already implemented portable medical benefits, your employees will be able to keep their medical benefits even after termination. The portable medical options are Portable Medical Benefits Scheme, Transferable Medical Insurance Scheme, and providing a Shield Plan.

Read Also: 5 Work-From-Home Apps To Help Keep You Focused And Organised

#4 Accelerate Vesting Of Stock Options

Startups typically offer equity in the business to attract top talent. The stock options also serve as a form of performance incentive, part of the selling point is that employees may one day own a valuable share of the startup if it makes it big. 

When startups lay off their employees, they might still have unvested options on hand, or have a limited window to exercise their stock options. In the unfortunate event that you should let your employees go, you could consider providing accelerated vesting of stock options, as did Glassdoor when it let 300 of its employees go due to the COVID-19 pandemic

If it is feasible, you might also want to extend the post-termination exercise period, that is the window of time after their departure date that employees can purchase their shares. It would be tough for retrenched employees to come up with the necessary cash, especially during such uncertain times.

Read Also: Flat Hierarchies In Startups: Here Are The Downsides You May Not Realise

It Helps To Provide Clarity As Soon As Possible 

Above all, your layoffs should be handled in a humane and compassionate manner. Provide your employees with a longer notice period whenever possible, and communicate clearly about the decision-making process, and how the layoff will pan out. 

A responsible retrenchment is vital in keeping the morale of both your current and exiting employees, and may even impact the recruitment of talent in future.

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