Severance in the employment context refers to the process of ending an employee’s employment with a company. This can happen for a variety of reasons, such as termination, layoff, or retirement.

Small and Medium enterprises (SMEs) in Singapore should have a severance policy in place to ensure that the process is handled fairly and transparently. A severance policy can also protect the company by providing guidance on how to handle severance situations and outlining the company’s obligations to employees.

Having a severance policy can also help SMEs avoid disputes with employees and minimize the risk of legal action. It can also help to maintain a positive reputation and foster good relations with former employees, which can be beneficial for the company in the long run.

Legal considerations for severance in Singapore

There are several legal considerations that SMEs in Singapore should be aware of when it comes to severance.

Under the Employment Act, employees who have been with a company for at least two years are entitled to severance pay if their employment is terminated by the company. The amount of severance pay is based on the employee’s length of service and salary.

In addition to severance pay, employees are also entitled to a notice period when their employment is terminated. The length of the notice period depends on the employee’s length of service and the terms of their employment contract.

Other relevant laws that may apply to severance in Singapore include the Retirement and Re-employment Act, which covers employees who are at least 62 years old. This act requires employers to offer re-employment to eligible employees until the age of 67 unless it is unreasonable to do so.

It is important for SMEs to be aware of these legal requirements and to ensure that they comply when handling severance situations. Failing to follow the laws and regulations on severance can result in legal action being taken against the company.

Developing a severance policy for SMEs in Singapore

When developing a severance policy for an SME in Singapore, there are several factors to consider. These may include the size of the company, the industry in which it operates, and the company’s culture.

One important factor to consider is the size of the company. A larger company may have more resources and may be able to offer more generous severance packages. On the other hand, a smaller company may have more limited resources and may need to be more conservative with severance pay.

The industry in which the company operates may also affect the severance policy. For example, companies in highly competitive industries may need to offer more generous severance packages to attract and retain top talent.

The company’s culture is another important factor to consider. A company that values its employees and has a positive work culture may want to offer more generous severance packages to maintain good relations with former employees.

In terms of the components of a severance policy, there are several key elements to include. These may include eligibility requirements, notice periods, and severance pay calculations.

When determining eligibility, consider factors such as length of service, job performance, and the reason for the employee’s departure. Notice periods should be based on the employee’s length of service and the terms of their employment contract. Severance pay calculations should take into account the employee’s length of service and salary.

To create a fair and reasonable severance policy, it is important to consult with a legal counsel and ensure that the policy complies with relevant laws and regulations. It is also a good idea to seek input from employees and consider their feedback when developing the policy.

Communicating and implementing the severance policy

Effective communication and implementation of a severance policy are crucial for ensuring that the process is handled fairly and transparently.

To ensure that employees are aware of the policy, it is important to clearly communicate the policy to all employees clearly. This can be done through employee handbooks, company policies and procedures, or through separate communication channels such as meetings or emails.

It is also important to be transparent when handling severance situations. This means being upfront with employees about the reason for their departure and clearly explaining any severance entitlements or obligations. It is also a good idea to provide employees with resources and support during the transition period, such as career counselling or assistance with job searches.

By communicating and implementing the severance policy fairly and transparently, SMEs can minimize the risk of disputes and maintain good relations with former employees. This can help to protect the company’s reputation and foster a positive work culture.

Conclusion

In conclusion, having a severance policy in place is important for small and medium enterprises (SMEs) in Singapore. A severance policy can ensure that the process of ending an employee’s employment is handled fairly and transparently, and can protect the company from disputes and legal action.

To create and implement a fair and effective severance policy, SMEs should consider factors such as the size of the company, the industry in which it operates, and the company’s culture. The policy should include eligibility requirements, notice periods, and severance pay calculations, and should comply with relevant laws and regulations.

Effective communication and implementation of the severance policy are also crucial. This includes communicating the policy to employees and being transparent when handling severance situations.

To learn more about how to develop and implement a severance policy in Singapore, consider enrolling in SHRI Academy’s course on Employment Severance: Termination, Dismissal, Retrenchment, Retirement & Frustration of Contract. This course will provide you with the knowledge and skills you need to handle severance situations fairly and effectively.