I REFER to the media reports on the retrenchment exercise by DBS Bank.
I remember that during the last bad recession of 2001-2002, the government and union leaders had worked very hard to push through several proposals to help companies and employees deal with unexpected slowdowns in future. One of the key proposals was the implementation of the monthly variable component (MVC) and/or annual variable component (AVC) mechanism.
This was basically a flexible salary arrangement that employers could build into their wage systems during good times, and which could be relied upon as a first step to help companies cope with unexpected business downturns.
The idea was that companies could first cut workers' salaries (by up to 30 per cent) to help them cut costs instead of taking the more painful step of retrenching staff.
This was actively promoted to companies in Singapore and although not all companies incorporated this wage mechanism into their pay systems, the Singapore banks (including DBS) were among the first to do so.
Now that the time has come to activate the above mechanism, DBS has instead chosen the path of least resistance by retrenching 900 staff.
It is still early days in our economic slowdown and I find that DBS has jumped the gun in opting for such a quick and massive retrenchment exercise. It sends all sorts of wrong signals and does not bode well for the future as more companies will be tempted to follow the same route.
I have some questions:
Why did DBS not use the MVC/AVC mechanism first to cope with the downturn in business (it was reported that DBS's Q3 net profit has slumped to $379 million - still a decent profit and not a loss).
Were the unions consulted on the retrenchment exercise? If yes, why did they not press DBS to use the MVC/AVC mechanism first before considering such a massive retrenchment exercise? Even in the last recession, I remember DBS had retrenched just 160 staff.
