Notice and Severance

Notice Requirement

Either party can terminate a contract according to the provisions of the law or a collective agreement  or by the agreement of the two parties, by serving a notice or paying in lieu thereof. According to the Labour Proclamation, a contract of employment may be terminated on the expiry or completion of the fixed term contract or piece work; on worker's death; on lawful retirement of the worker; when the undertaking ceases operation permanently due to bankruptcy or for any other cause; or incapacity due to disability.

The employment contract may also be terminated on account of worker's conduct, ability to do work, or the organizational and operational requirements of the undertaking. Labour Proclamation also mentions certain grounds, which do not require notice prior to contract termination.

A worker may terminate the employment contract by serving 30 days' prior notice to the employer. On the other hand, an employer may terminate the employment contract of a worker by observing a notice period as follows:

- One month for workers who have completed their probation and their period of service is not more than 1 year;

- Two months for workers who have a period of service from one to nine (1-9) years;

- Three months for workers with more than 9 years of service; and

- Two months for workers who have completed probation period but whose employment is terminated due to the reduction of work force.

Source: §24-35 of the Labour Proclamation No. 377/2003 (amended by Proc. No. 466/2005 & Proc. No. 494/2006); §2571 of the Civil Code, Proclamation No. 165 of 1960

Severance Pay

The Labour Proclamation provides for severance pay for a worker who has completed his probation. A worker is entitled to severance pay on contract termination by the employer because he/she has ceased its operations permanently due to bankruptcy or some other reason; or if the worker's employment contract is terminated against the provisions of law; or if the worker is part of the reduced workforce; or If the employer has done something unlawful hurting worker's rights; or if his employer has not taken any action to secure the health & safety of workers even after being informed about the dangers in the workplace; and if the employment contract is terminated because of partial or total disability.

The amount of severance pay depends on the length of service and is payable at the following rates:

-30 days' wages for one year (as well as first year) of service (severance pay for workers with less than 1 year of service is calculated in proportion to the period of service);

-10 days' wages for every additional year of service after the first year (however, the total severance pay must not exceed 12 months' wages);

- 60 days' wages in addition to the above payments for workers who are terminated on grounds of redundancy.

Source: §39-40 of the Labour Proclamation No. 377/2003 (amended by Proc. No. 466/2005 & Proc. No. 494/2006)

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