Notice and Severance
Notice Requirement
Contract termination is regulated under the Employment Act. A fixed-term contract and a task-based contract automatically terminate on the expiry of the term and on completion of the specific task, respectively. An indefinite term contract may be terminated by either party after serving a written notice.
Contract termination notice depends on the wage period. The required notice period is one month for workers paid wages on a monthly rate. For workers paid fortnightly, the required termination notice is 15 days for workers with less than five years of service and a 30-day notice for workers with at least five years of service. For workers paid weekly, the contract termination notice ranges between one week (less than 2 years of service) to two weeks (2-5 years) and finally one month (at least 5 years). For those workers paid hourly or daily, the contract termination notice is one day for less than six months of service; one week for six months to two years of service; 15 days’ notice for 2-5 years of service; and one month for at least 5 years of service.
Where the wage period is different from those specified above (except for an annual rate), either party may terminate the contract at the end of a working day without notice. The minimum notice period in respect of a fixed-term contract is fourteen (14) calendar days.
Either party can waive its right to notice and is also free to accept payment in lieu of notice. In lieu of providing notice of termination, the employer has to pay the employee a sum equal to the remuneration that would have been received during the notice period and confer on the employee all other benefits due to the employee up to the expiration of the required period of notice.
Where the employee terminates the contract without notice in the circumstance in which notice was required, and the employer has not waived the right to notice, the employee is required to pay the employer in lieu of notice a sum equal to the remuneration that would otherwise have been given to the employee up to the expiration of the required period of notice.
Source: §28-30 of the Employment Act (No. 6 of 2000), last amended in 2021
Severance Pay
The Employment Act regulates severance payments. Severance pay is only given to those employees who are dismissed for economic reasons (termination of a contract as a result of redundancy or retrenchment, or due to economic difficulties, or technical, structural or operational requirements of the employer) or unfairly (unfair dismissal). A worker must have completed one year of service for entitlement to severance pay. Severance pay is not payable for workers during the probationary period; dismissal on objective grounds; dissolution of the employer (partnership) and unreasonable refusal to accept an offer on similar terms; and death of the personal employer and unreasonable refusal to accept an offer on similar terms.
On the termination of a contract as a result of redundancy or retrenchment, or due to economic difficulties, or technical, structural or operational requirements of the employer or unfair dismissal of the employee, workers are entitled to severance payment in the following manner:
a) no severance pay for less than one year of service;
b) two weeks’ wages for each completed year of service: first to fifth year;
c) three weeks’ wages for each completed year of service: sixth to tenth year;
d) four weeks’ wages for each completed year of service: eleventh year and onward
If an employee has been exempted from providing pension benefits to the employees, the employer is required to provide gratuity (on meeting three-month qualification service) on retirement, termination of employment or death of the worker. In such a case, the payable gratuity is equal to 5% of the monthly salary of a worker for each completed month of service (60% of the final monthly salary for each completed year of service).
A worker is entitled to wages and remuneration due on the termination or completion of his employment contract within 7 days of such termination or completion.
Source: §35 & 53 of the Employment Act (No. 6 of 2000), last amended in 2021
