Retrenchment Benefit Calculator

What you are owed if you are retrenched

Two different things are due when a retrenchment happens, and it helps to keep them apart. Notice, or pay in lieu of it, is a legal minimum under the Employment Act. Retrenchment benefit is not: it is whatever your contract of service or collective agreement provides, and where neither provides for it the amount is negotiated.

The tripartite norm, set out in the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, is a payment of between 2 weeks and one month of salary for each year of service. In unionised companies where the collective agreement fixes the quantum, the norm is one month of salary for each year of service.

How the two are worked out

1. Check eligibility for benefit. Employees with 2 years of service or more are eligible. Those with less may be granted an ex-gratia payment out of goodwill, but there is no expectation of one.
2. Take your gross monthly salary and your completed years of service.
3. The lower end of the norm is 2 weeks of salary for each year of service; the upper end is one month of salary for each year.
4. Work out the notice period separately, from your length of service.
5. If notice is not worked, pay in lieu is the salary for that period.

The statutory notice ladder has four rungs. Under 26 weeks of service it is 1 day. From 26 weeks to under 2 years it is 1 week. From 2 years to under 5 years it is 2 weeks. At 5 years and above it is 4 weeks. Your contract may set something longer, and if it does, the longer period applies.

The thing people misread: a norm is not an entitlement

Employees frequently arrive at a retrenchment exercise expecting the upper end of the range as of right. It is not owed. An employer's ability to pay depends on its financial position at the time, and the advisory asks employers to pay a reasonable sum, not a prescribed one. Where a union is involved and the collective agreement fixes the quantum, that agreement is what binds — which is why unionised employees usually see the higher figure.

The reverse trap catches employers. If a retrenchment follows shortly after a pay cut, the salary before the cut should be used to compute the benefit. Cutting salaries and then retrenching does not reduce what is owed, and doing it that way will not be viewed as responsible retrenchment.

Why your own figure will differ

The largest variable is your own contract. Read it before you accept anything: a contractual retrenchment formula overrides the norm entirely, in either direction. Long-serving executives, employees on fixed-term contracts and those whose pay includes large variable components all sit outside the simple monthly-salary model this calculator uses.

Employers must also notify the government of retrenchments under the Employment Act, and are expected to consult the union early and to help affected staff into new jobs. If the exercise did not follow those expectations, that is worth raising even where the money is not in dispute.

Common questions

Do I get retrenchment benefit after one year? There is no eligibility for retrenchment benefit under 2 years of service. Your employer may still make an ex-gratia payment.

Is notice pay part of the retrenchment benefit? No. They are separate. Notice, or pay in lieu of it, is a statutory minimum owed on termination; retrenchment benefit is additional and is a matter of contract or negotiation.

Can my employer give me less notice than the ladder? Not less than the statutory minimum for your length of service. It can give more, and many contracts do.

What if I have been there for exactly 5 years? At 5 years and above the notice period is 4 weeks. The eligibility threshold for benefit was passed long before that.

The eligibility rule, the benefit norms and the notice schedule are published by MOM in its Tripartite Advisory. Talk to MOM or to your union if you think an exercise was not handled properly.