Notice and Severance
Notice Requirement
The Labour Act, 2003 (Act 651) establishes the requirements for notice periods when terminating an employment contract, applicable to both employers and employees, unless specific exceptions apply.
Termination of an employment contract by either the employer or employee must be communicated in writing, specifying the reason and date of termination. The notice period begins from the date the notice is delivered to the other party.
The length of notice depends on the duration of the employment contract: 1. One month’s notice: For contracts of 3 years or more. 2. Two weeks’ notice: For contracts of less than 3 years. 3. One week’s notice: For contracts on a week-to-week basis (e.g., casual or probationary workers).
These statutory periods apply unless the contract of employment stipulates a longer notice period, in which case the contractual term prevails.
Instead of serving the notice period, either party (employer or employee) may opt to pay the other party a sum equivalent to the remuneration that would have been earned during the notice period. This effectively terminates the contract immediately upon payment.
If parties have signed an “at will” clause in the contract, employment may be terminated by any party at the end of the working day without any notice. The contract termination notice should be in the written form, and the notice period includes the day on which the notice was given.
Exceptions to Notice Requirement Notice is not required in certain circumstances: - Gross Misconduct An employer may terminate an employee without notice if the employee commits gross misconduct. The employer must substantiate the misconduct, typically through a fair investigation or hearing, to avoid claims of unfair dismissal. - Expiry of Fixed-Term Contract: No notice is required if the employment ends naturally on expiry of a fixed-term contract or upon completion of a specific task for which the employee was hired. - Death or Dissolution: The contract terminates automatically upon the death of the employee or the dissolution of the employer’s business, with no notice required.
Employee Resignation - An employee terminating their employment must provide written notice in accordance with the statutory minimums or the terms of their contract, whichever is longer. - The same option of payment in lieu of notice applies if the employee wishes to leave immediately.
Additional Considerations
- Probationary Periods:
For employees under probation or engaged for less than 6 months, the Act allows shorter notice periods as agreed in the contract, but it does not specify a minimum beyond the week-to-week provision (one week).
- Collective Agreements or Contracts:
If a collective bargaining agreement or individual contract specifies a different (typically longer) notice period, that agreement takes precedence over the statutory minimums.
- Redundancy:
In cases of collective dismissals or redundancy, the employer must notify affected workers and their trade union at least 3 months in advance, in addition to any individual notice periods. This is a separate requirement and does not replace the termination notice for individual employees.
Summary of Notice Periods
| ** | Contract Period/Type | Notice Period | Alternative | ** |
|---|---|---|---|---|
| 3 years or more | 1 month | Payment in lieu of notice | ||
| Less that 3 years | 2 weeks | Payment in lieu of notice | ||
| Week-to-week basis | 1 week | Payment in lieu of notice | ||
| Gross misconduct | None | Immediate termination | ||
| Fixed-term contract expiry | None | Automatic termination | ||
| Redundancy (notification) | 3 months (to union/employee) | N/A (plus individual notice) |
Sources: § 15-17 & 62-66 of the Labour Act 2003 (Act 651)
Severance Pay
There is a provision in the law regarding redundancy pay (paid only if an organization closes down or is merged with another organization and this leads to the worker losing his benefits or even job).
However, this redundancy compensation is not fixed by Law, it is subject to negotiation between the employer or representative of the employer and the worker or the trade union. There is no severance pay in the case of individual dismissals (for non-economic reasons).
In the event of unfair dismissal, a worker may file a complaint with the Commission. If, on investigation, the Commission finds that the termination of employment was unfair, it may order the employer to:
- reinstate the worker from the date of termination of the employment;
- re-employ the worker, either in work in which the worker was employed before termination or in other reasonably suitable work on the same terms and conditions enjoyed by the worker before termination; or
- pay compensation to the worker.
Other than redundancy pay (for economic dismissals), workers are also entitled to the following payments on termination of employment:
- any remuneration earned by the worker before contract termination;
- any deferred pay due to the worker before contract termination;
- any compensation due to the worker in respect of sickness or accident; and
- repatriation expenses in the event of contract termination for foreign contracts.
The employer is required to make all these payments within the duration of the notice period. In case no notice is required, payment must be made until the next working day after termination.
| ** | Aspect | Individual Dismissal | Collective Dismissal (Redundancy) | ** |
|---|---|---|---|---|
| Statutory Severance | Not required unless unfair dismissal remedy applies | Required as "redundancy pay" | ||
| Amount | None mandated; discretionary if unfair dismissal | Negotiated, no fixed statutory amount | ||
| Notice Period | 1 week to 1 month, or payment in lieu | 3 months notification plus individual notice |
Sources: § 18, 64 & 65 of the Labour Act 2003 (Act 651)
