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[SINGAPORE] The topic of retrenchments invariably sparks debate, but the Sep 17 announcement of online travel agency Agoda’s layoff exercise triggered the ire of unions and manpower authorities for imposing prohibitive terms in its severance package.

A major objectionable clause in the agreement was the warning to affected workers – including 50 in Singapore – that their severance entitlement would be revoked if they reported the event to government agencies, statutory bodies or trade unions. Agoda carried out the retrenchments in August.

The National Trades Union Congress (NTUC) called the terms “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.

The Business Times spoke with human resources (HR) and legal practitioners on the dos and don’ts for employers and employees.

What is a severance agreement?

A severance agreement is a document an employee signs at the end of his or her 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 have become more common, said Carmen Wee, founder and chief executive of strategic HR advisory firm Carmen Wee & Associates. This comes on the back of a rising number of layoffs in recent years by big names.

For instance, Lazada in January 2024 offered a severance payment to staff affected by its retrenchment exercise. Mediacorp did the same when it laid off 93 employees earlier in September this year – staff were paid one month’s salary for every year of service, up to 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,” Wee noted.

What does the law in Singapore say?

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 benefits as “goodwill payments” to incentivise employees to enter into separation agreements.

In exchange, the employer obtains a waiver and release of all claims from the employee. This would look like 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,” Kaur 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 raise the matter to the Tripartite Alliance for Dispute Management (TADM) for mediation, and to the Employment Claims Tribunal (ECT).

This implies that “any agreement not to submit a mediation request to TADM or make a claim with the ECT is also not enforceable under the Employment Claims Act”, said Desmond Chng, director at Drew & Napier.

MOM also asserted this in its second official statement on the issue on Sep 19: “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 pointed out that the wording of “making a report” in Agoda’s severance document is “ambiguous and ill-defined”. It potentially captures 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,” the lawyer added.

From an HR viewpoint, the clause is not quite enforceable either, said Wee. This is because MOM requires all companies with businesses registered in Singapore with a minimum of 10 employees to inform the ministry of their retrenchments.

“This requirement makes it hard for Agoda to tie their affected staffs’ hands, too,” said Wee, adding that, following this incident, MOM will likely assess the company’s work pass privileges more stringently.

The travel agency issued a 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”.

Kaur also said that it cannot be assumed that Agoda had breached its mandatory reporting obligations, as it may have submitted its retrenchment report to MOM in line with the stipulated parameters.

“If it transpires that Agoda did not abide by these mandatory guidelines, however, there would likely be further consequences such as administrative penalties (like) a fine or stronger enforcement action,” she added.

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 (the) whole, doesn’t serve the organisation well,” she added.

Mandatory retrenchment benefits

Should there be legally binding layoff benefits? This question resurfaced when Agoda’s layoffs came to the fore.

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,” the HR practitioner said.

“Displacements are likely to be quicker and more common – for both young and old.”

She added that it is unlikely Agoda will be the last company 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

Another issue left hanging in the balance pertains to statements allegedly made by Agoda’s management to employees at multiple internal town halls in Singapore in recent years.

They reportedly said the customer experience group (CEG) function – the roles which were cut – in the city-state “existed mainly to satisfy the local workforce quota” for the company to hire foreign talent in engineering and IT roles.

A source also told BT that tweaks in S Pass quotas may have also contributed to Agoda’s decision to scale down operations in Singapore.

Wee said that such statements, if true, reflect a “poor company culture”. “In many, many years of HR work, I’ve never heard that said explicitly (by a company).”

“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,” she added.

Agoda did not respond to queries from BT regarding the alleged comments on S Pass quotas.

The travel agency set up new CEG sites in Gurugram (India), Foshan (China) and Cairo (Egypt) about a year ago. These locations have lower operating costs than Singapore.

Wee said that employees who find themselves in a similar position as those affected by this layoff case should escalate their issues to TADM, or call 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 added.

Layoffs should also be handled in a “responsible and sensitive” manner, said Drew & Napier’s Chng. 

“Employers should clearly communicate with employees about their options and the consequences of accepting any goodwill payment and signing any waiver and release of claims.”

He added: “This also means that those who intend to pursue claims should be careful not to sign any waiver and release of claims, or accept the severance payment.”