Notice and Severance

Notice Requirement

The Labour Bill provides for the termination of contract through notice. The reasons for contract termination through notice include the disability of the worker to perform his work or long illness exceeding the limits of paid or unpaid annual sick leave; on the completion of work or expiry of the period of contract; the total destruction of the establishment; attaining the age of 60 years; dismissal of the worker or desertion of work by the worker during probationary period; agreement of the parties to terminate the contract; resignation of the worker; or death of the worker.

 

The contract termination notice period is dependent upon the payment period of the worker (daily, weekly, fortnightly and monthly basis) and length of service. The notice period is one month for a worker paid on monthly basis; two weeks for a worker paid on fortnightly basis and has completed less than five years of service; one week for a worker paid on weekly basis on completion of less than two years of service and two weeks if the worker has completed two years but less than five years of service. If the worker is paid on the daily basis, the employment contract can be terminated on any working day if the worker has not completed three months of continuous service. The notice period for daily wage workers is one week if the worker has completed between three months and two years of continuous service and two weeks' notice period if the worker has completed between two to five years of continuous service. The notice period for workers paid on daily, weekly and fortnightly basis is one month if the worker has completed at least five years of service. The notice period is six months for expiration of contract by reason of reaching the age of pension. The law provides for payment in lieu of notice if the contract terminating party does not give due notice to the other party. On completion of the half of the notice, the worker may leave work to look for new job however he/she is paid wages for the remaining period of notice. If a worker is entitled to some annual leave on the expiry of a work contract, the remaining leave period cannot be calculated in the notice period.  

 

The law also provides termination of contract by the employer without notice to the worker. The reasons include assuming personality of some other person or using forged papers for employment; gross negligence on the part of the worker causing heavy financial loss to the employer; non-compliance with health and safety instructions; disclosure of industrial or commercial secrets; conviction of worker on an offence concerning honour, honesty, morality or some immoral act committed at the workplace; assault on the employer, manager or other superior workers; and if a worker is found in obvious state of drunkenness or under influence of any intoxication. A worker can also terminate the contract without notice to the employer in the following cases: if the worker is cheated by the employer or any other person working on his/her behalf; if the employer or any other person working on his/her behalf commits an assault punishable by the law; and if there is a serious danger threatening the safety of the worker or affecting his or her health; provided that the employer knows the danger and does not take the measures and procedures necessary to prevent the same.

 

However a work contract cannot be terminated without notice before referring the dispute to the competent authority and obtain its approval. The competent authority has to make the appropriate investigations concerning that case and has to give its decision within a maximum period of two weeks starting from the date of referring the dispute thereto. An employer may apply to the competent authority for reduction of number of workers or closing of the workplace for economic or technological reasons.

 

Sources: §49-56 of Labour Bill, 2011

Severance Pay

A worker is entitled to severance pay/gratuity on completion of at least three years of service. The severance pay is calculated as follows:

- one basic monthly wage for each year of service for worker with greater than 3 but less than 10 years of service;

- one and a half monthly wage for each year of service for workers with greater than 10 but less than 15 years of service (for each year after the first 10 years); and

- one and three quarterly monthly wage for each additional year of service for workers with greater than 15 years of service

 

Total severance pay can't exceed 36 months' basic wage.

 

If a worker has terminated the contract, he/she is entitled to severance pay at the following rates:

-25% of the gratuity payable (normally) with five years of service;

-50% of the gratuity payable (normally) with five but less than 15 years of service;

-75% of the gratuity payable (normally) with 15 but less than 20 years of service; and full gratuity (100%) payable (normally) with 20 years of service

 

The seasonal workers are also entitled to gratuity if their seasonal work duration is at least three months and provided that the actual days of service with the same employer are not less than three years.

 

Sources: §59-62 of Labour Bill, 2011

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