Restructuring, referred to as ‘retrenchment’ in the Asia-Pacific region where terminations arise due to a redundancy situation, is now a common feature of the employment landscape in the region. Yet employers frequently underestimate the risks created by poor processes, weak communication and insensitive execution. This can damage morale, trigger disputes and increase regulatory scrutiny. 

In this article, we explore key considerations for restructuring exercises in Malaysia, Singapore and India, three major markets in the region. We do so through the following lenses: legal compliance, human impact and practical implementation. The article draws on insights from the second webinar in the Ius Laboris ‘Restructuring in Asia-Pacific’ series entitled ‘Restructuring in Asia-Pacific: What Can Possibly Go Wrong? Employment Law Risks in Restructuring – Singapore, Malaysia and India Perspective.’ 

Legal compliance remains the foundation of any restructuring or retrenchment exercise. Each of the three jurisdictions impose strict procedural requirements, and failures can lead to serious consequences. These include potential reinstatement, back wages, penalties and reputational harm. 

Singapore

Employers in Singapore must meet obligations in employment contracts, workplace policies and the Tripartite Advisory on Responsible Retrenchment. The Advisory is not legally-binding, but the Ministry of Manpower (MOM) expects employers to comply with it.  

Failure to follow the Advisory may result in regulatory scrutiny and reputational damage. Two Singapore cases illustrate the risks: 

• Duty Free Singapore (DFS) (pre‑Covid): DFS retrenched about 50 staff with immediate effect and gave no prior notice. It offered only one week’s pay per year of service, which fell below local standards. The media criticised the process, and the MOM stated that the retrenchment should have been handled better. The Tripartite Alliance for Fair and Progressive Employment Practices intervened to improve outcomes. 

• Lazada (2022): Lazada conducted retrenchments immediately after the New Year without advance notice. Employees shared their experiences online, and this triggered strong public criticism. Unions and the MOM stepped in to mediate, and employees later received enhanced severance packages. The case is a warning for employers about timing and sensitivity in restructuring exercises. 

Arguably the most powerful penalty for non-compliance in Singapore is the potential debarment or curtailment of work pass (or work visa) privileges. This can occur where there are breaches of the Advisory. The inability to renew or hire employees on work passes can impose significant operational and administrative strain on multinational companies. 

Malaysia

Employers in Malaysia must demonstrate a genuine redundancy, use fair selection criteria and as far as possible, follow the Code of Conduct for Industrial Harmony. Courts examine supporting documentation closely. Employers must also: 

• issue proper notice; 

• calculate retrenchment benefits correctly (where applicable); and  

• file the relevant forms with the Labour Department.  

The AirAsia X (Wong Zi Chuang) case in Malaysia illustrates the potential consequences where employers fail to provide a sufficient justification for a retrenchment. This case followed Malaysia’s COVID‑19 Movement Control Order where several national quarantine measures were implemented by the government in response to the COVID-19 outbreak. AirAsia X applied a ‘Best Fit’ performance‑based system instead of the ‘last in first out’ principle (known as the ‘LIFO’ principle) when selecting a pilot for retrenchment.  

The Industrial Court found the selection process unfair. It held that the company failed to justify the redundancy because only three months had passed since the lockdown and all pilots faced similar conditions. The Industrial Court awarded 11 months’ compensation and 24 months’ back wages, minus a 15% deduction for post‑dismissal earnings and his three months’ salary in lieu of notice.  

India

In India, employers must first determine whether an employee qualifies as a ‘worker’ under the Industrial Relations Code 2020. If the employee is a worker, then the full statutory retrenchment process must be followed. Requirements include: 

• providing notice (or wages in lieu of notice);  

• paying retrenchment compensation at 15 days’ average pay per completed year of continuous service;  

• applying the LIFO principle; and 

• obtaining prior government approval for industrial establishments, being factories, mines and plantations, with 300 or more workers. 

Courts in India will also examine the economic justification put forward for a retrenchment. The 2025 Salunkhe case is a recent example highlighting the importance of getting this right. There, the employer retrenched five permanent employees with more than 20 years’ service, citing a lack of available work. The Bombay High Court found that the employer failed to demonstrate a genuine economic justification. It reinstated all employees with back-pay. The Court emphasised that procedural compliance alone is insufficient where the underlying rationale lacks substance.   

Legal compliance alone does not protect employers. Restructuring or retrenchment also carries a human cost, and poor handling can undermine trust, morale and productivity across the workforce.  

The experience in Malaysia, Singapore and India shows that risk can just as much turn on how decisions are perceived, in addition to whether legal requirements are met. Courts, regulators and employees focus closely on fairness, transparency and credibility. 

The above case law examples illustrate different aspects of this: 

• In Singapore, the Lazada retrenchment highlights how poor timing and communication can trigger reputational damage and regulatory scrutiny. 

• In Malaysia, the AirAsia X decision shows how selection criteria perceived as unfair can undermine the credibility of the exercise. 

• In India, the Salunkhe case demonstrates that a lack of genuine rationale can lead to reinstatement, even where processes appear compliant. 

Across all three jurisdictions, a consistent message emerges. Employees assess whether decisions are fair, explained and justified. Where they are not, disputes and scrutiny are more likely to follow. 

Optics also matter, of course. Visible security measures, rushed conversations or lack of transparency can quickly erode trust.  

Employers should therefore approach restructuring as both a legal and organisational challenge. How decisions are communicated and implemented can be just as important as the decisions themselves.  

While employers must comply with jurisdiction-specific requirements, the lessons from Malaysia, Singapore and India point to a consistent set of practical steps that support both compliance and employee trust. Key actions include:  

• Communication: Communicate early and clearly. Explain the business reasons and allow employees time to ask questions. Use face‑to‑face delivery for sensitive cases.  

• Optics: Manage optics carefully. If possible, avoid sudden terminations, security escorts or insensitive timing, and choose private settings for difficult conversations.  

• Documentation: Record all reasons for redundancy, alternatives considered and selection criteria. Courts and authorities expect strong evidence of a genuine redundancy scenario.  

• Engagement with unions and authorities: Engage early to reduce the potential for escalation.  

These three key markets show that restructuring requires more than technical compliance.  

Of course, employers must meet legal requirements, document decisions properly and manage the process with care. At the same time, how restructuring is handled can be just as important as the legal framework. Poor communication or insensitive execution can lead to disputes, regulatory scrutiny and reputational damage. 

Employers should therefore take a balanced approach. Clear communication, fair selection processes and thoughtful implementation will reduce risk and help maintain employee trust during organisational change.  

*You can watch the full webinar recording on our YouTube channel, together with the other sessions in our three-part series.