Staff layoffs should be last resort, say experts

Companies confronting the downturn amid the pandemic have been implementing cost-cutting measures in recent weeks – with some cutting salaries of not just management staff, but also rank-and-file workers.

In the light of this, experts are cautioning firms against layoffs without first taking other steps to keep things going.

Some companies in Singapore, including those in hard-hit sectors, have made early moves to reduce their wage bills.

Restaurant chain Sushi Tei implemented a 30 per cent cut to basic salary for staff on April 1, according to a staff memo seen by The Straits Times.

Last month, concert promoter Unusual Limited announced a 10 per cent to 20 per cent pay cut across the company. Several of its events have been cancelled owing to the Covid-19 pandemic.

Food and beverage player BreadTalk Group is cutting between 10 per cent and 50 per cent of staff salaries from last month to June, with both middle management and senior executives affected.

The likes of transport operator ComfortDelGro, national carrier Singapore Airlines and property giant CapitaLand have announced pay cuts for senior management.

Wage reduction trickling down organisational levels is a “very familiar cycle” that has played out during past recessions, noted DBS Bank senior economist Irvin Seah, adding that it is still early days yet in terms of salary and job cuts.

Since mid-March, firms have had to notify the Ministry of Manpower about cost-cutting measures affecting workers’ salaries.

When asked about the number of firms that have given notifications of such measures, a ministry spokesman said: “Given the scale and impact of the circuit breaker measures, many companies in Singapore have been affected and have had to make adjustments to work and salary arrangements.”

The spokesman added that the information submitted has allowed the ministry, along with Workforce Singapore and tripartite partners, to follow up with affected parties to render support.

DOWNSIDES

Retrenchment (affects) the morale of the workforce, which will further dampen productivity in the long run. Rehiring and retraining employees are additional expenses… not to mention the likely war for talent that ensues when the crisis is over.

MR SAMIR BEDI, Asean workforce advisory leader for professional services firm EY.

But despite recent government support and the downsides of retrenching staff – such as rehiring expenses and the reputation hit – layoffs may still be in store, especially for companies that lack financial buffer.

“Cutting headcount can provide a relief for finances, but it is not a cure-all,” said Mr Seah.

“Of course, for companies with a weaker financial standing, there will inevitably be some job losses. But the Government is trying to prevent a sudden blow-up of the job market and mass retrenchments (through the policy measures).”

But he forecasts that close to 25,000 retrenchments could come this year, with the labour market likely to bottom out only around the year end.

Just last week, fashion e-commerce start-up Zilingo, which is backed by Temasek, reportedly laid off about a third of its Singapore workforce.

Mr Adrian Ole, executive director of human capital consulting at Deloitte South-east Asia, said: “Firms should take a strategic view on staff reduction by establishing a target for temporary workforce reduction based on scenario planning.” This includes the consideration of costs associated with both temporary and permanent reduction of headcount, such as impact on the firm’s reputation.

Mr Ole suggested alternative work arrangements, such as voluntary reduced work hours, sabbaticals at partial pay, and voluntary time off at partial or no pay with full benefits coverage.

Singapore Business Federation (SBF) chief executive Ho Meng Kit noted that retrenchment should be a last resort and done only in a fair and responsible manner, based on objective criteria instead of discriminatory practices. “To assist affected employees, companies should provide a longer notice period if possible and reasonable retrenchment benefits.”

Mr Ho added that the SBF is also working with Workforce Singapore and other trade associations and chambers to expand the SBF ManpowerConnect scheme to match Singapore companies that have local workforce redundancies to companies that are still hiring.

The initiative is part of the SGUnited Jobs initiative.

Mr Samir Bedi, Asean workforce advisory leader for professional services firm EY, said: “Organisations can exercise creativity in keeping non-wage and manpower costs low and maintaining cash flow.”

This could include experimenting with marketing strategies to reach out to an alternative customer base.

“Retrenchment (affects) the morale of the workforce, which will further dampen productivity in the long run. Rehiring and retraining employees are additional expenses for organisations, not to mention the likely war for talent that ensues when the crisis is over,” he added.

Professor Foo Maw Der from Nanyang Technological University’s Nanyang Business School said that some less profitable companies are likely to go out of business, especially after support measures introduced in the recent Budgets run out.

“While this can be a painful thing in the immediate term, in the longer period, there is a silver lining in that the remaining firms could be more productive.”

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