Lazada did not inform the union about its layoffs. But are companies required to do so?

SINGAPORE: When Lazada laid off workers earlier this month without informing the union, it not only raised the union's ire but raised questions on whether companies in Singapore are required to do so. 

Employees of the e-commerce giant have estimated that about 100 staff members were laid off. Some told CNA the layoffs caught them off guard and that the company offered them an unsatisfactory retrenchment package. It also did not waive the non-compete clause in their employment contracts.

After news of the layoffs broke, the National Trades Union Congress (NTUC) and its affiliate Food Drinks and Allied Workers Union expressed disappointment at not being consulted ahead of time.

Both said in a joint statement that this was "unacceptable" and that they had escalated the matter to the Manpower Ministry.

Lazada has apologised and the Food Drinks and Allied Workers Union – which represents some of the company's workers – is in negotiations for additional retrenchment benefits.

FIRMS "CANNOT IGNORE" UNIONS

While companies in Singapore that have at least 10 employees must inform the Manpower Ministry before laying off workers, there are no legal implications if they do not notify unions.

However, a tripartite advisory on “responsible practices” for retrenchment includes coming to an agreement with the union about compensation and how workers were selected for layoffs. 

Even though companies are not obliged to engage with NTUC, the union has taken the initiative to engage firms on retrenchment matters, said Dr Chew Soon Beng, a professor of economics and industrial relations at Nanyang Technological University.

For example, if NTUC becomes aware of a company’s intention to retrench a few hundred employees, it would approach the firm to find ways to minimise the number of workers affected, said Dr Chew, who has authored several publications on unions.

“Big firms cannot ignore NTUC" especially if they are laying off a substantial number of workers, he added. As the sole national trade union centre in Singapore, NTUC works closely with the Manpower Ministry and other government agencies.

Lazada's retrenchment exercise was deemed unacceptable by the union as it could have "adverse societal effects", said Dr Xu Le, a lecturer at the department of strategy and policy at the National University of Singapore (NUS) Business School.

"It may have a ripple effect, with other companies following this behaviour and resulting in more unemployment and social challenges,” Dr Xu said. 

Even non-unionised companies should engage tripartite organisations and seek guidance before retrenchments, said Mr Aslam Sardar, CEO of the Institute for Human Resource Professionals. 

“It is important for companies to view the tripartite organisations as partners and collaborate with them to ensure that the exercise is conducted in an objective and transparent manner, and to provide as much support to the affected workers as possible.” 

Firms should consider that layoffs have a “consequential impact” on their reputation and employee value proposition, both of which would affect the company's future, he said. 

Early communication and conducting the exercise with empathy will “go a long way”, said Mr Aslam. Businesses should be open and transparent on the reasons for the layoff and communicate this to affected employees personally. 

They should also explain the possible next steps as well as how they will be helping employees. 

RETRENCHMENT BENEFITS: WHAT IS THE NORM?

Laid-off Lazada workers were told that they would receive two weeks' salary for every year of service.

Retrenchment benefits are not mandatory under the Employment Act. Any benefits a laid-off worker gets depend on the staff’s employment contract and the company's policies, said the Institute of Policy Studies' Dr Faizal Yahya.

“The employment contract should therefore be the first recourse for an affected employee, followed by the company’s internal policies or other regulations,” said Dr Faizal, a senior research fellow in governance and economy. 

This is in line with the Manpower Ministry's policy that the amount of compensation depends on what is stated in the employment contract or collective agreement for unionised companies.

If it is not provided, it would have to be negotiated between the employer and employees or their union.

The prevailing norm is to pay between two weeks' and a month's salary for each year of service, depending on the company’s financial position and the industry.

In unionised companies where the retrenchment compensation is stated in the collective agreement, the norm is a month’s salary for each year of service.

LAZADA COMPENSATION "BELOW MARKET STANDARD"

While Lazada’s compensation was within the recommended scale, the union may have found it lacking given the company’s financial position.

“Lazada’s retrenchment benefit is not satisfying in comparison to the company’s consistently strong performance in the previous year,” said Dr Xu from NUS. 

While Lazada's financial figures for 2023 have not been disclosed, she noted its robust performance within the Alibaba group, including a 53 per cent year-on-year growth in the third quarter of last year. Lazada was acquired by Alibaba in 2016. 

“Despite these positive indicators, Lazada's retrenchment benefit remains at the lower end of the scale.” 

Dr Xu added that other companies have implemented “more generous” severance packages. For example, Google reportedly offered a minimum of 16 weeks of severance pay during its retrenchment exercise last January

Singapore-based Grab – which cut 1,000 jobs last June – offered employees a severance payment of half a month for every six months of completed service, or based on local statutory guidelines, whichever is higher.

The company’s chief executive had said that laid-off employees would also get a "goodwill payment" for "forgone target bonus and equity". 

“(Industry) norms dictate that Lazada's proposed payout falls below market standard, and a larger payout is warranted,” said Ms Amarjit Kaur, partner in litigation and arbitration at Withers KhattarWong.

Besides the lower-than-expected payout, the union likely also found that the help and job support Lazada offered to affected employees was lacking.

Such support could include outplacement services, counselling, referral letters, assistance with finding alternative employment and post-termination training opportunities.

Institute for Human Resource Professionals' Mr Aslam said organisations need to balance the short- and long-term implications of its retrenchment benefits, as this will have an impact on subsequent business decisions.

“These decisions will likely impact the current workforce as well as prospective talent,” he said.