Notice and Severance
Notice Requirement
An employer is required to provide written notice before terminating an employee’s contract, except in cases where the dismissal is summary—such as for serious misconduct. The notice must be in written form clearly mentioning the reason for dismissal in understandable language.
The employment of a worker terminates on expiry of employment contract, or expiry of contract for a fixed term, attainment of retirement age, or completion of specific task without renewal. A worker may terminate an employment contract with or without notice in case of misconduct on the part of the employer; and , before expiry of termination notice period.
A worker may be terminated after serving due notice period or paying in lieu of notice. The required notice period depends on the worker's length of service as follows:
- 2 weeks for service of more than 6 months but less than 1 year;
- 1 month for service of more than 12 months but less than 5 years;
- 2 months for service of more than 5 years but less than 10 years;
- 3 months for service of 10 years or more. During probation, either party may terminate a contract of service by providing a notice not less than 14 days. A contract of service may be terminated without providing any notice of termination in cases of misconduct, summary dismissal, and breach of contract. In all instances, termination should be based on fair reasons (including termination by notice). An employee cannot be denied these notice rights through any agreement. However, the law permits compensation in lieu of notice. Source: §57 & 68 of the Employment Act 2006, last amended in 2023
Severance Pay
There is a provision in the law regarding severance pay, but this compensation is subject to negotiation between the employer and the worker. Severance pay is entitled to the worker after continuous service (of a particular employer) for at least 6 months or more. It is due in the following circumstances:
- unfair dismissal of the worker by the employer;
- death of the worker at work not attributable to any misconduct of the worker;
- termination by the worker due to physical incapacity not attributable to any misconduct of his own;
- termination because of the death or insolvency of the employer;
- termination by a labour officer following the inability or the refusal of the employer to pay wages; and
- other cases as provided by the Minister.
No severance allowance is paid when an employee is summarily dismissed with justification, when an employee is first dismissed but later is offered reemployment, which he/she unreasonably refuses; and in cases where an employee abandons his or her employment and absconds from the workplace for more than 3 days without any explanation given to the employer. Severance pay is also not payable on termination of the probationary contract.
The amount of severance pay is negotiable between the employer and the worker or the labour union that represents them. The severance pay must include any gratuity, bonus, or pay (amount deducted for severance allowance) and paid on the cessation of employment.
For a deceased employee, severance pay must be paid to the surviving spouse (other adults/ dependents) within 30 days.
An employer who fails to pay the severance allowance on time and according to the prescribed manner commits an offence and will pay a fine of twice the amount of the payable severance allowance.
Source: §86-91 of the Employment Act 2006, last amended in 2023
