Government to overhaul retrenchment law, boost severance benefit

KE­JAN HAYNES

Lead Ed­i­tor- News­gath­er­ing

The Gov­ern­ment plans sweep­ing changes to the Re­trench­ment and Sev­er­ance Ben­e­fits Act to pre­vent em­ploy­ers from avoid­ing sev­er­ance pay­ments through in­sol­ven­cy, tem­po­rary lay­offs or stag­gered job cuts, Labour Min­is­ter Leroy Bap­tiste an­nounced at a press con­fer­ence at UNC head­quar­ters on Sun­day.

Min­is­ter Bap­tiste said the amend­ments to the 1985 leg­is­la­tion would re­de­fine re­dun­dan­cy, mod­ernise com­pen­sa­tion rates and es­tab­lish a guar­an­teed Sev­er­ance Ben­e­fit Fund, while en­sur­ing all re­trenched work­ers qual­i­fy for ben­e­fits, re­gard­less of com­pa­ny size or the method used to ter­mi­nate em­ploy­ment.

He said the ex­ist­ing law had been ex­ploit­ed to the dis­ad­van­tage of work­ers, leav­ing many with­out re­course when com­pa­nies closed, claimed in­sol­ven­cy or placed em­ploy­ees on pro­longed “tem­po­rary” lay­off.

“Re­dun­dan­cy is deemed to be es­sen­tial­ly sur­plus labour on­ly, and there­fore, an em­ploy­er could have eas­i­ly avoid­ed any oblig­a­tion to work­ers,” Min­is­ter Bap­tiste said.

Un­der the pro­posed changes, re­dun­dan­cy would be ex­pand­ed to in­clude in­sol­ven­cy, re­ceiver­ship and dis­con­tin­u­a­tion of op­er­a­tions, giv­ing work­ers a right to sev­er­ance ben­e­fits even when a busi­ness shuts down.

A key amend­ment would in­tro­duce a guar­an­teed sev­er­ance ben­e­fit fund, aligned with ILO Con­ven­tion 173, re­quir­ing em­ploy­ers from the out­set of em­ploy­ment to set aside funds to cov­er sev­er­ance li­a­bil­i­ties.

An­oth­er change would re­move the cur­rent thresh­old re­quir­ing five or more work­ers to be re­trenched be­fore the Act ap­plies. Min­is­ter Bap­tiste said em­ploy­ers had been able to send home work­ers in small batch­es to avoid oblig­a­tions. Un­der the amend­ments, the Act would ap­ply even if a sin­gle work­er is re­trenched.

The gov­ern­ment al­so plans to close what the Labour Min­is­ter de­scribed as a ma­jor loop­hole around tem­po­rary lay­offs. Em­ploy­ers would be re­quired to fol­low a for­mal pro­ce­dure, and work­ers placed on lay­off for more than 90 days would gain an en­ti­tle­ment to sev­er­ance ben­e­fits.

Com­pen­sa­tion rates, un­changed since 1985, al­so would be over­hauled. Min­is­ter Bap­tiste said the ex­ist­ing for­mu­la is out­dat­ed and no longer re­flects eco­nom­ic re­al­i­ties.

“Right now, if you are less than one year and three to five years, you would be en­ti­tled to two weeks’ pay, and any­thing five years and more, three weeks’ pay per year,” he ex­plained.

The pro­pos­al un­der con­sid­er­a­tion would move to three weeks’ pay per year for one to five years’ ser­vice, and four weeks’ pay per year for work­ers with more than five years’ ser­vice, sub­ject to re­view by the At­tor­ney Gen­er­al’s Of­fice.

Min­is­ter Bap­tiste linked the re­trench­ment re­forms to a broad­er leg­isla­tive pack­age, in­clud­ing amend­ments to ex­pand ma­ter­ni­ty pro­tec­tion and in­tro­duce paid leave for fa­thers and adop­tive par­ents, say­ing the changes were aimed at pro­tect­ing fam­i­lies as well as in­di­vid­ual work­ers.

Some 279 pri­vate sec­tor work­ers were re­trenched be­tween Jan­u­ary 14 and Au­gust 18, 2025, ac­cord­ing to fig­ures from the Min­istry of Labour pro­vid­ed in re­sponse to a Free­dom of In­for­ma­tion Act re­quest.

Dur­ing the pe­ri­od, 27 com­pa­nies con­duct­ed re­trench­ment ex­er­cis­es, and the Min­istry re­ceived 34 phys­i­cal no­tices un­der the Re­trench­ment and Sev­er­ance Ben­e­fits Act.