FUND TO ASSIST PAYMENT OF RETRENCHMENT BENEFITS

Mr Ong Ah Heng asked the Minister for Manpower, as it is foreseeable that more retrenchment exercise will take place, whether he will consider setting aside a fund to help companies which have difficulty in paying retrenchment benefits to their workers, following the practice of the Japanese government.

Dr Lee Boon Yang: In practice, companies which retrench workers will pay those with more than 3-years' service retrenchment benefits, depending on their collective agreement, contract of employment, or industrial norm as well as the company's financial position. The plight of the retrenched workers should be addressed by helping them to secure re-employment as soon as possible. For those who are unable to find jobs on their own, they should approach my Ministry's Employment Service Department (ESD) for assistance. Despite the slowdown of our economy, retrenched workers should be able to secure alternative employment if they are realistic in their expectations and willing to make adjustments.

The proposal to set up a special fund to help companies which have difficulties in paying retrenchment benefit to their workers is not a sound long-term solution to the problem.

Firstly, the fund has to be financed through additional taxes and levies and this will increase the costs of doing business and make it more difficult for companies to survive this economic slowdown. Secondly, it could encourage some employers to shed their responsibility of having to pay a retrenchment benefit to the affected workers. Thirdly, paying retrenchment benefits on behalf of employers would lead us closer to a system of unemployment benefits with all its undesirable side-effects.

Experience of countries with welfare system including unemployment benefits has shown that there are serious disadvantages when the state assumes such responsibility. Apart from imposing a heavy financial burden on the taxpayers, it provides workers with a false sense of security, encourages prolonged periods of unemployment and reduces the sense of urgency in skill upgrading. Over time, it could erode the positive work attitudes which are crucial for Singapore's continued success in economic competition.

However, we are not leaving retrenched workers including those who failed to secure retrenchment payments to fend for themselves. Government has committed $50 million with another $50 million from the Skills Development Fund to extend the reach of the Skill Redevelopment Programme. This programme is specifically targetted at older workers, who would face more difficulty getting alternative jobs, to be retrained for new jobs. Apart from paying for the training cost, the Programme also bears part of the wage cost of the worker when he is undergoing training. This will make it more attractive for other employers to take in these workers.

I am therefore of the view that it will not be in the interest of Singapore to set up a retrenchment fund to help ailing companies pay retrenchment benefit.