Retrenchment Benefits in Singapore vs TFR and Collective Dismissal in Italy

Singapore and Italy both expect employers to pay something when employment ends for business reasons. The mechanism is completely different. In Singapore, the retrenchment benefit is a negotiated norm. In Italy, TFR is a statutory deferred payment due on every exit, and redundancies have their own legal procedures.

Singapore: retrenchment benefits by norm  

The Employment Act does not set an amount for retrenchment benefit. MOM and the tripartite partners publish the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment, which sets out the expectations:

• employees with at least two years of service are eligible for a retrenchment benefit;
• the prevailing norm is between two weeks’ and one month’s salary per year of service, depending on the employer’s financial position and industry practice;
• in unionised companies, the amount comes from the collective agreement and the norm is one month per year of service;
• employees with less than two years’ service may get an ex-gratia payment.

Employers with at least 10 employees must also file a Mandatory Retrenchment Notification with MOM, generally within five working days of telling the affected employees. MOM data shows that from 2020 to 2025 around 8 in 10 eligible employees received at least two weeks’ salary per year of service.

The Advisory expects fair selection criteria, early notice and support for affected employees, and TADM can mediate disputes.

Italy: TFR on every exit  

TFR (trattamento di fine rapporto, art. 2120 Civil Code) is not a redundancy payment. It is deferred pay that builds up throughout employment and is paid whenever the employment ends: dismissal, resignation, retirement or the end of a fixed-term contract.

Each year, the employer sets aside an amount equal to annual pay divided by 13.5, about 7.4% of pay. A small part is netted against INPS contributions, so the effective accrual is often quoted at about 6.91%. The accrued amount is revalued each year by 1.5% plus 75% of the inflation index.

The employee chooses where future TFR goes: it can stay with the employer or go to a supplementary pension fund. Employers with at least 50 employees (average in their first year of activity) pay the TFR left with them into the INPS Fondo di Tesoreria (Law 296/2006). The 2026 Budget Law extends this to employers that grow later: at least 60 employees in 2026–2027, 50 in 2028–2031 and 40 from 2032 (INPS circular 12/2026).

For budgeting, TFR is a fixed cost of roughly 7% on top of gross pay from day one.

Individual redundancy in Italy  

Eliminating a single role is a dismissal for justified objective reason. The employer must show that the reorganisation is real and that the employee could not reasonably be moved to another role. Notice is due under the CCNL. Employers above a certain size must first run a conciliation procedure at the labour office for employees hired before 7 March 2015. See Termination with notice in Singapore vs dismissal rules in Italy .

Collective dismissal in Italy  

Law 223/1991 applies when an employer with more than 15 employees plans to dismiss at least five employees within 120 days in the same province for the same reason. The procedure includes:

1. written notice to the workplace union representatives and trade unions, explaining the reasons, numbers and roles involved;
2. a consultation phase with the unions, then with the public authorities if no agreement is reached;
3. selection of employees using criteria set by agreement or, failing that, by law (family responsibilities, seniority, technical and organisational needs);
4. written dismissal notices and communications to the authorities.

Mistakes in the procedure or the selection criteria can make dismissals unlawful. Employers also pay the NASpI contribution for each employee dismissed. In 2026 the contribution is €649.73 for each 12 months of service in the last three years (41% of the €1,584.70 monthly NASpI cap), so up to €1,949.19 per employee; in a collective dismissal without a union agreement it is tripled (art. 2, paras. 31 and 35, Law 92/2012).

Side by side  

The real cost of an Italian exit  

A Singapore finance team modelling the cost of a redundancy in Italy should include:

• notice pay under the CCNL;
• TFR already accrued (a liability on the balance sheet from day one);
• accrued and unused leave and the pro-rata 13th month;
• the NASpI contribution;
• any settlement agreed to make the exit final.

The settlement is not statutory, but in practice many exits are negotiated, because a settlement signed in a protected venue closes off future claims.

Common questions from Singapore teams  

Is TFR the same as CPF? No. CPF is a contribution paid into the employee’s account every month. TFR is a liability held by the employer (or paid into a pension fund) and handed over at the end.

Can we agree to pay a retrenchment benefit instead of TFR? No. TFR is mandatory. Any severance or settlement is on top.

Does a short-tenure employee get TFR? Yes, pro rata, even after a few months.

What this means if you hire through an EOR  

With an Employer of Record, TFR accrues in the EOR’s payroll and is paid out by the EOR at the end. If you need to reduce headcount, the EOR runs the individual or collective procedure as the legal employer. Because the EOR employs people for many clients, whether a collective procedure applies depends on its own headcount and the case, so ask early.

What to plan:

• treat TFR as part of the monthly cost, not as a surprise at the end;
• keep a reserve for notice and a possible settlement;
• document business reasons for any role elimination.

See the full list of differences on Italy vs Singapore , check what the contract says about notice in Italian employment contracts , and see how TFR adds up in the cost calculator . Related: CPF vs INPS: the real employer cost of a salary .

The bottom line  

In Singapore, retrenchment benefits depend on service and negotiation. In Italy, TFR is earned every month and paid on any exit, and redundancies follow formal steps. Budget for it from the start.

Questions about a restructuring? Contact us .

General information, not legal advice.