[SINGAPORE] Retrenchments invariably spark debate, but online travel firm Agoda’s layoff exercise last week triggered the ire of unions and manpower authorities for imposing prohibitive terms in its severance package.
A major objectionable clause was the warning to affected workers – including 50 in Singapore – that their severance entitlement would be revoked if they report the event to government agencies, statutory bodies and trade unions.
NTUC called it “irresponsible” and said it was “appalled” by Agoda’s actions.
Following talks with the Ministry of Manpower (MOM), the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP), NTUC and its affiliate Singapore Industrial and Services Employees’ Union (SISEU), Agoda on Friday (Sep 19) apologised for including the “inappropriate” clauses.
The whole sorry saga has trained the spotlight on the ethics and legalities of such retrenchment clauses.
BT talks to human resource and legal practitioners on what are the dos and don’ts for employers and employees.
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What is a severance agreement?
A severance agreement is a document an employee signs at the end of the relationship with an employer. It sets out the nature of affairs concerning both parties moving forward, and could cover payments to be made to the employee.
Severance packages are more common of late, said Carmen Wee, founder and chief executive of strategic human resources (HR) advisory firm Carmen Wee and Associates, on the back of a rising number of layoffs in recent years by big names.
This was observed in the case of Lazada in January 2024, with a severance amount offered to affected staff, as well as Mediacorp’s layoff of 93 employees in September this year. In the latter case, staff were paid one month salary for every year of service, with a cap of 25 months or S$250,000.
“A common practice in Singapore as per advisory guidelines has been to pay workers who have been laid off at least two weeks pay for each year of service,” she noted.
What’s the law?
In Singapore, retrenchment benefits are not statutory entitlements, Amarjit Kaur, head of employment law at Withers KhattarWong, told BT.
This means that employers such as Agoda may treat such retrenchment benefits as “goodwill payments” to incentivise employees to enter into separation agreements.
The employer in exchange obtains a waiver and release of all claims by the employee, an agreement by the employee to abide by a non-disparagement clause, for example.
“The employee agrees to receive the payment in exchange for giving up certain rights and liberties when he/she signs a settlement agreement, generally,” she explained. “This includes filing a legal claim and/or disparaging the company – so it would be inconsistent with the settlement’s terms for the employee to commence legal action.”
What is statutorily protected, however, are the employees’ rights to bring to the Tripartite Alliance for Dispute Management (TADM) for mediation, and to the Employment Claims Tribunal (ECT).
This is something that MOM asserted in their second official statement on the issue on Sep 19 evening, stating that: “while employers can enter into severance agreements with retrenched employees, they should not prevent the latter from reaching out to authorities and unions with genuine concerns.”
Kaur also observed that the wording in “making a report” used in Agoda’s severance document is “ambiguous and ill-defined”, such that it could potentially capture unrelated escalations to the authorities, quasi-governmental bodies and trade unions.
“This phrasing, while arguably legal, is an overreach and unduly oppressive in curtailing employees’ ability to reach out to these organisations,” she said.
The clause in question, to Wee, is also not quite enforceable from a HR viewpoint as well, because there is a mandatory requirement by MOM for all companies with businesses registered in Singapore with a minimum of 10 employees to inform the Ministry of their retrenchment.
“This requirement makes it hard for Agoda to tie their affected staffs’ hands, too,” said Wee. She added that following this incident, the travel agency’s work pass privileges will likely be looked at more stringently by MOM.
Agoda has since issued a company statement on Sep 19 apologising for the “language in their agreements that gave the impression employees could not approach government agencies, statutory bodies or trade unions for additional support and advice.”
According to Kaur, it cannot be assumed to have breached its mandatory reporting obligations, as Agoda may have independently submitted its own retrenchment report to the MOM in line with the stipulated reporting timelines and parameters.
“If it transpires that Agoda did not abide by these mandatory guidelines, however, there would likely be further consequences such as administrative penalties such as a fine, or stronger enforcement action,” the Withers KhattarWong lawyer said.
Her assessment of Agoda’s case ultimately leans towards “irresponsible retrenchment practices with the use of pressure tactics to deter escalation, though within legal boundaries.”
“The impression of heavy-handedness and oppression in the language in the Agoda separation agreement on a whole doesn’t serve the organisation well,” she noted.
Mandatory retrenchment benefits
Should there be legally binding layoff benefitS?
To Kaur, there is value in such an approach, but in reality businesses need the flexibility to determine the amount to be paid on a sliding scale.
“This is in light of how layoffs are usually downstream of financial challenges and are often a last resort arising out of re-organisation or downsizing.” She added: “It remains to be seen if sufficient consensus can be reached for retrenchment benefits to be enshrined in legislation, considering Singapore’s unique Tripartite employment landscape.”
For Wee, the idea of mandatory retrenchment benefits is a “step in the right direction.”
“There won’t be an easy consensus on such an issue – but the reason I would argue that we need a proper retrenchment law is also because of the likelihood of accelerated job displacements in our economic climate today, particularly amid rapid disruption with artificial intelligence,” she said. “Displacements are likely to be quicker and more common – for both young and old.”
Wee said it is unlikely that companies like Agoda will be the last caught with bad (layoff) practices.
“In light of this, we cannot just rely on government pressure when things go wrong – more must be done.”
Corporate culture and morale
A final issue left hanging in the balance is statements by Agoda’s management to employees at multiple internal local town halls in recent years, allegedly stating that the customer experience group (CEG) function in Singapore “existed mainly to satisfy the local workforce quota” for it to hire foreign talent in engineering and IT roles.
A source had also told BT he believes tweaks in S Pass quotas may have also contributed to the decision to scale down operations in Singapore.
Wee said that such statements, if true, reflects a “poor company culture”. “In many many years of HR work, I’ve never heard that said explicitly (by a company),” she added.
“It is a very cruel and inhumane way of expressing that the very existence of the workers in question is to hire the right foreign talent instead. What doesn’t help is the existing undercurrents of conflict between local and foreign talent hiring policy In Singapore over many years,” the HR professional explained.
Agoda did not respond to queries from BT regarding their alleged comments on S Pass quotas.
The company set up new CEG sites in Gurugram (India), Foshan (China) and Cairo (Egypt) about a year ago, which have lower operating costs than Singapore.
Wee shared that moving forward, employees who find themselves in a similar position to this layoff case should not hesitate to escalate their issues to TADM, or call up the MOM hotline to register their concerns.
“A group of workers stepping up together can also be more helpful to initiate a more favourable and constructive call to action,” she pointed out.
