Notice and Severance
Notice Requirement
Under the Labour Act, 2007, there is termination of employment through notice, termination through payment instead of notice and automatic termination of the employment contract.
For termination of an employment contract on notice, whether by employer or employee, the period of notice cannot be less than one day if the employee has been employed in the establishment for four weeks or less. If the employee has been employed for more than four weeks but not more than one year, the period of notice should not be less than one week. Where the employee has been employed for than one year, the notice period should be at least one month.
Payment in lieu of notice is allowed. Instead of giving notice, the employer can pay the employee the remuneration the employee would have received if the employee had worked during the period of notice. Similarly, an employee can pay the employer the remuneration the employer would have paid if the employee had worked during the period of notice and terminate the employment contract immediately.
An employment contract terminates automatically one month after the death or sequestration of the employer or the shutdown of the business. However, the employment may continue for a longer period as provided in the employment contract/collective agreement, or during the duration where the employer continues to carry on business.
The notice of termination must be in writing and must state the reasons for termination. The date on which the notice is given must also be stated. It should be noted that an illiterate employee can give notice orally.
Source: §30-32 of the Labour Act, 2007
Severance Pay
In accordance with the Labour Act, 2007, an employer is to give severance pay to an employee who was dismissed, died while employed, or resigned/retired upon reaching the age of 65, as long as at least 12 months of continuous service were completed. However, severance pay does not need to be paid where there were fair grounds for dismissal due to misconduct or poor performance, if the employee refuses to be reinstated, where the employee refuses to accept less favourable terms of employment with the next of kin of the deceased employer upon one month from the latter’s death, or refuses to accept employment with former partner(s) upon dissolution of partnership.
Severance pay must be in an amount equal to at least one week’s remuneration for each year of continuous service with the employer. The payment of severance pay does not affect an employee’s right to any other amount that the employee is entitled to. Where the contract of employment was terminated as a result of the employee’s death, then in the absence of a will, the employer must pay severance to the employee’s surviving spouse. Where there is no spouse, then to the children of the deceased employee and where there are no children, to the employee’s estate.
Source: §35 of the Labour Act, 2007
