I was very happy to see in the news that DFS has finally (after 2 half-hearted attempts) proposed a decent retrenchment package.
What did DFS initially propose?
When DFS first laid off its staff suddenly, employees were initially given only one week’s pay per year of service, capped at 13 weeks only.
But did you know the prevailing norm is between 2 weeks to 1 month salary per year of service?
Furthermore, retrenchment benefits can even be 1 month’s salary for each year of service, and can be extended to 25 weeks (or sometimes even no cap) in unionised companies.
This means that if you had worked at DFS for more than 13 years, you would be severely shortchanged.
Mr David Yeo, secretary-general of the Singapore Manual and Mercantile Workers Union (SMMWU), described these terms in the first proposal as ‘peanuts’.
How does the union improve employees’ welfare?
If a single employee goes to DFS to complain about the pathetic retrenchment package, do you think DFS will accommodate his request and extend the improved terms to all employees? This is very unlikely.
However when SMMWU engages the company in negotiations on behalf of DFS employees, many voices combine to be heard, to put pressure on management to rethink their proposal.
Unions also have the advantage of knowing the better “norm” that they have bargained with other unionised companies, to pressure DFS into following this norm.
Hence, even though DFS improved their proposal, SMMWU refused to agree to DFS’ second proposal (of two weeks’ salary for each year of service, capped at 13 years), because it was way beyond the “norm”.
What are typical retrenchment benefits negotiated by the union?
NTUC assistant secretary-general Patrick Tay said that retrenchment benefits in unionised environments are usually one month per year of service. These benefits are subject to factors such as the profitability of the company.
“In some instances no cap, and in some instances a cap of 25 years.”
Mr David Yeo also explained how the company’s financial viability becomes a factor in union negotiations.
“Usually we will ask what’s the profitability of your company? What is the trend of your profitability? What is your liquidity? Will you go bankrupt if you pay your workers?”
The union also takes the age of affected employees into account in determining the value of severance packages, which usually includes an ex-gratia payment to help them upgrade their skills or do some job switch training.
This is because older employees may be more vulnerable as they may find it harder to get a new job due to ageism.
Mr Yeo said:
“A union isn’t just about money, but also helping them to find alternative jobs. And that also means, for older workers, they have to be retrained and reskilled. But more importantly, before you get a new job. What do they live on in the meantime?”
What is the end result of union intervention?
After weeks of SMMWU collective bargaining with DFS, the retrenchment package was improved to one month’s salary for each year of service, capped at 25 years of service.
For an employee earning $4,000 a month, and have been working for 25 years in DFS, what retrenchment benefits would you get?
First proposal: $4,000 / 4 weeks x 1 week for 13 years = $13,000
Second proposal: $4,000 / 4 weeks x 2 weeks for 13 years = $26,000
Third proposal: $4,000 x 25 years = $100,000 !!!
With collective bargaining via the union, DFS employees get 7x better benefits.
Ms Lily Teo, a 54-year-old employee who has been working at DFS for 31 years, said the higher payout would help her tide through this period while she looks for another job.
“Go for job interview, also need to travel and need to eat… Now they say hard to find work because the job market is very soft. So I thought I can work part-time first until Chinese New Year, then I will find a permanent position.”
Also, although some employees have already been laid off, the revised terms of the severance payout will apply to them too.