Asia: Redundancy – Key considerations

Questions

Singapore

Malaysia

Japan

Vietnam

Is there a statutory definition for redundancy?

No, there is no statutory definition of 'redundancy' in Singapore, but retrenchment or redundancy generally refers to a portion of the staff or the labour force being discharged due to surplusage.

No, there is no statutory definition of "redundancy" in Malaysia.

However, case law has defined redundancy to mean “the discharge of surplus labour or staff by the employer for any reasons whatsoever otherwise than as a punishment inflicted by way of disciplinary action”.

No, there is no statutory definition of "redundancy" in Japan.

Termination of employment on the grounds of redundancy is only permitted where:

• the reduction of the workforce is a necessity;
• the employer has acted reasonably in choosing specific employees for termination;
• the employer has made a reasonable effort to avoid unilateral termination of employment; and
• the employer has discussed the termination of employment with the employee.

No, there is no statutory definition of "redundancy" in Vietnam.

Termination of employment on the grounds of redundancy is only permitted in the following circumstances:

• corporate restructuring;
• economic reasons, including economic crisis or recession; and implementation of the State’s policies regarding restructuring of the economy or implementing international agreements; and
• merger, consolidation, division or separation of the employer, or business / asset transfer.

Can a genuine redundancy be a fair reason for termination?

Yes.

To be genuine, the redundancy must not be used in place of another reason (for example, poor performance) and should be objectively justifiable.

Reorganisation due to economic factors (for example, where the company is facing financial difficulty) is likely to be a fair reason for termination as are efficiency savings achieved by reducing any surplus of labour. Objectively justifiable factors (for example, financial accounts showing a loss) are useful to show that the redundancy is genuine.

Yes.

To be genuine, the redundancy must not be used in place of another reason (for example, poor performance) and should be objectively justifiable.

Reorganisation due to economic factors (for example, where the company is facing financial difficulty) is likely to be a fair reason for termination as are efficiency savings achieved by reducing any surplus of labour. Objectively justifiable factors (for example, financial accounts showing a loss) are useful to show that the redundancy is genuine.

Yes.

To be genuine, the redundancy must not be used in place of another reason (for example, poor performance).

An employer's need to reduce the number of its employees will be justified where the employer is in critical financial condition which can be alleviated by the reduction, or where the employee terminations are unavoidable (eg, due to closure of office).

However, because of the narrow interpretation of what constitutes lawful dismissal, it is market practice to offer special severance in return for an employee's voluntary resignation and agreement to release the employer from all potential claims in relation to the employee's termination of employment.

Yes, a genuine redundancy in accordance with the labour usage plan can be a fair reason for termination.

To be genuine, the redundancy must not be used in place of another reason (for example, poor performance) and should be objectively justifiable.

Reorganisation due to economic factors (for example, where the company is facing financial difficulty and needs to partly/wholly close down a functional department/ division) is likely to be a fair reason for termination. Objectively justifiable factors (for example, financial accounts showing a loss) are useful to show that the redundancy is genuine.

However, if only one employee is to be made redundant, this will not be considered a genuine redundancy exercise in Vietnam.

Are there statutory selection criteria requirements?

No.

However, there are government advisories such as the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment (Advisory) which provides that employers should adopt objective and consistent selection criteria.

The Advisory also emphasises the need to maintain a strong "Singaporean Core" and to ensure that redundancies should not result in a reduced proportion of local employees.

While the Advisory is non-binding, employers are expected to comply with it.

Yes.

Affected employees should be pooled according to the work they perform and selections for redundancy made for fair reasons. When selecting between pools of employees performing the same work, employers are required to comply with two principles:

• Foreigners Out First
• Last In, First Out

Where there are employees performing the same role, a foreign employee must be selected for redundancy before the employment of a Malaysian citizen is terminated.

From the remaining pool of employees, selections should be made based on length of service with those with the shortest service period being selected for redundancy in preference to those with longer service.

No.

However, employees should generally be selected based on fair and objective criteria, applied consistently in a non-discriminatory manner.

No.

However, employees should generally be selected based on fair and objective criteria.

Affected employees should be pooled according to the work they perform and selections for redundancy made for fair reasons which should be expressly addressed in the labour usage plan. It is common to look at length of service when selecting between similar employees.

Are there classes of employees who are protected from redundancies?

Yes.

There is a blanket prohibition on an employer giving notice of termination during a female employee's absence on statutory maternity leave or on such a day that the notice will expire during the absence on statutory maternity leave.

Additionally, an employer who gives notice of termination:

• without sufficient cause; or
• on the ground of redundancy or reorganisation,

to a pregnant employee (as medically certified), is liable to pay her the maternity benefits that she would have been entitled to, so long as the employee has at least three months' service.

Yes.

A female employee who is on maternity leave is protected from the termination of her employment. The exception to this is where such termination arises from the closure of the employer's business.

Yes.

Termination is prohibited in the following specific circumstances:

• during a period of leave for medical treatment and for 30 days thereafter, where the leave is for an injury or disease incurred in the course of employment, except where the period of leave has exceeded three years and where the employer pays compensation equivalent to 1,200 days' salary.
• by reason of the employee's nationality, creed, social status or sex;
• due to a female employee's marriage, pregnancy, childbirth or requesting for, or taking of, maternity leave;
• for requesting or taking childcare or family care leave;
• due to labour union membership;
• for reporting to the authorities regarding a violation of certain employment laws; or
• for making a disclosure under the Whistleblower Protection Act.

Yes.

The Labour Code sets out specific circumstances in which termination is prohibited, which include where the employee:

• is being treated for an illness or injury caused by a labour accident or an occupational illness, except in the circumstances that the employee is suffering from an illness and remains unable to work for a considerable period of time;
• is on annual leave, personal leave or any other approved absence;
• in the case of a female employee, is getting married, is pregnant on maternity leave or has a child under the age of 12 months; or
• is on leave pursuant to the regime on parental leave in accordance with social insurance legislation.

Does offering an alternative role avoid redundancy payment?

This depends on whether the employee accepts the role.

If the employee accepts the alternative role, then no as the employee is not made redundant (note however that there are no statutory severance payment obligations in Singapore, though the Advisory recommends, and most employers will pay, retrenchment payments).

However, if the employee is offered, but does not accept the alternative role and they are made redundant, then the recommended retrenchment payment as set out in the Advisory (and any contractual redundancy payment) is payable.

This depends on whether the employee accepts the role.

If the employee accepts the alternative role, then no as the employee is not made redundant.

However, if the employee is offered, but does not accept the alternative role and they are made redundant, they are still entitled to severance pay.

Additionally, if the alternative employment is with a different employer (including within the same group of companies), the employee is still entitled to severance pay.

There is no general statutory entitlement to severance pay upon redundancy in Japan, but it is market practice to offer special severance in return for an employee's voluntary resignation and agreement to release the employee from all potential claims in relation to the employee's termination of employment.

This depends on whether the employee accepts the role.

If the employee accepts the alternative role, then no as the employee is not made redundant. Suitable alternative employment may be in a different location, but must be on no less favourable terms and conditions, including in relation to status and pay.

However, if the employee is offered, but does not accept the alternative role and they are made redundant, they are still entitled to severance payment.