Notice and Severance
Notice Requirement
If an employer wants a worker to stop working at the end of a fixed-term contract, the employer must inform the employee in advance about the expiration or renewal of the contract. If the length of the contract is less than or equal to 6 months, no notice is required. If the fixed-term contract is concluded for a period longer than 6 months but less than one year, the required notice period is 10 days. If the term of the contract is more than 1 year, the employer has to inform the worker of the renewal at least 15 days before the expiry of the contract. If no prior notice is provided, the fixed-term contract is automatically renewed for the same length of time. An indefinite-term contract may be terminated by either party by written notice or by paying compensation in lieu of notice. The required notice period depends on the worker's length of service as follows: - 7 days for less than or equal to six months of service; - 15 days for 6 months to 24 months of service; - 1 month for two to five years of service; - 2 months for five to ten years of service; and - 3 months for more than 10 years of service.
During the notice period, the worker continues working under the same terms and conditions, except that the worker may take up to 2 days of paid leave per week to look for a new job and may stop working earlier if he or she finds new employment. If an employer fails to give the termination notice, they must provide the wages and benefits that the employee would have earned during the notice period, calculated on the basis of average daily earnings over the past 12 months. Notice is not required in cases of serious misconduct, during probation, or in the event of force majeure (acts of God) that prevent one of the parties from meeting contractual obligations. Employers are, however, required to give prior notice when terminating an indefinite-term contract due to an employee’s chronic illness, insanity, or permanent disability.
Sources: §73-86 of the Labour Law, promulgated by Royal Order No. CS/RKM/0397/01 of 13 March 1997 (amended in 2021)
Severance Pay
The Labour Law provides for both severance pay and redundancy pay. Payments at the end of the contract include payment of last month’s wage, payment for unused leave and severance pay as applicable.
On the expiry or termination of a fixed-term contract, the employee has the right to receive severance pay. Severance pay must be at least 5% of the total wages paid to the worker during the length of a fixed-term contract.
On termination of employment, severance pay is payable to retrenched workers (terminated for economic reasons and other reasons except for serious misconduct), depending upon the length of service, at the following rates: - 7 days' wages for employment from 06 months to 12 months; and - 15 days' wages for every year of employment (up to a maximum of 6 months' wages)
Workers are also entitled to severance pay on contract termination due to health reasons. No severance payment is granted if a worker’s employment contract is terminated due to serious misconduct. The limit on severance pay to a maximum of 6 months’ wages has been removed in the 2018 amendment.
If a worker cancels the fixed-term contract without any legal reason, he/she must pay the employer for any damages suffered by him/her as a result. On the other hand, if an employer cancels a fixed-term contract without any legal reason, he must pay the worker the full amount (of wages) that the worker would have received if he/she had been allowed to work until the end of the contract.
The calculation of severance/redundancy payment is based on average earnings over the past 12 months. The Arbitration Council has, however, found that the overtime and bonuses received by the worker in the 12 months prior to dismissal should also be included in the calculation. The severance pay is not payable in the case of serious misconduct on the part of the worker or resignation by the employee. However, severance pay is payable if the employer pushed the worker to resign through serious misconduct (on the part of the employer). An employer is required to pay damages (in addition to severance/redundancy pay) if they terminate an indefinite term contract without a valid reason. Workers, unfairly dismissed, are entitled to damages of at least the same amount which they received as severance compensation on contract termination. The usual remedy for unfair dismissal is damages; however, a court may award reinstatement. Employers are also eligible for such damages if workers terminate the employment contract without valid reasons. These damages are not the same as compensation in lieu of notice. The worker, however, can request to be given a lump sum equal to the dismissal indemnity. In this case, he is relieved of the obligation to provide proof of damage incurred.
The damages for breach of the labour contract without valid reasons, as well as those owed by the employer as per provision of Article 90 are determined by the competent court and based on local custom, the type and importance of the service rendered, the worker’s seniority and age, the pay deductions or pension payments, and other circumstances that justify the existence and extent of damage.
If a worker unfairly terminates an employment contract and takes a new job, the new employer is jointly liable for damages caused to the former employer if it is proven that the worker was encouraged to leave the earlier job.
If a contract ends due to employer bankruptcy, workers still get all due wages, leave, and the standard 5% fixed-duration contract severance. Workers under indefinite-term contracts also get notice pay and any unpaid seniority payment in the event of bankruptcy.
Sources: §89-94 of the Labour Law, promulgated by Royal Order No. CS/RKM/0397/01 of 13 March 1997 (amended in 2021)
