Notice and Severance

Notice Requirement

A contract of employment terminates in the manner stated in the contract of employment or in any other manner (as stated in the Employment Code Act), except that where an employer terminates the contract, the employer must give reasons to the employee for the termination of the employee’s contract of employment. Contract termination without valid reason is not allowed. Valid reasons include those connected with the capacity or conduct of an employee or based on the operational requirements of an undertaking. A worker‘ contract may not be terminated on account of conduct or performance without giving the employee an opportunity to be heard.

A contract of employment expires: at the end of the term for which it is expressed to be made; on the death of the employee before the end of the term specified in the contract; on the employee attaining the applicable retirement age, where the contract of employment is permanent in nature; or in any other manner in which a contract of employment lawfully expires or is deemed to expire.

An employment contract may not be terminated based on the following reasons:

  1. union membership or participation in union activities outside working hours or, with the consent of the employer, within working hours;
  2. seeking office as, acting or having acted in the capacity of, an employee’s representative;
  3. the filing of a complaint or the participation in proceedings against an employer involving alleged violation of laws or recourse to administrative authorities;
  4. a discriminatory ground under Employment Code Act (refer to the topic on non-discrimination);
  5. family responsibilities relating to taking care of a member of an employee’s immediate family;
  6. absence from work during maternity or paternity leave; or
  7. temporary absence from work during sick leave or injury

 A worker is entitled to termination notice or payment in lieu of notice except in cases of gross misconduct. The notice period is generally specified under the employment contract. If it is not clearly provided under the contract of employment, the minimum duration is 24 hours for a contract of employment not exceeding one month; 14 days for a contract of employment ranging between one to three months; and 30 days for a contract of employment of more than three months. The notice to terminate a contract of employment of more than six months shall be in writing.

An employer is prohibited from giving termination notice during a period of leave taken under this Act; or which runs concurrently with any period of leave taken under this Act. Employer may pay in lieu of notice where termination notice is not served. If a worker refuses to work during notice period, the employer may deduct, from any money due to the employee on termination, the amount that would have been due to the employee if the employee had worked during the notice period. Task specific contracts as well as time specific contracts terminate on the completion of task and expiry of fixed period respectively without any need for termination notice. Probationary contract can be terminated on 24-hour notice.

Where an employer intends to terminate a contract of employment by reason of redundancy, the employer must give notice of at least 30 days to the employee or a representative of the employee of the impending redundancy and inform the representative on the number of employees (if more than one to be affected) and the period within which the termination is intended to be carried out;

The employment contract can be written or oral. The oral employment contract terminates at the end of notice period and no specific grounds are required for its termination. However, specific procedural requirements are followed in case of summary dismissal and redundancy, as provided by the law. The written employment contract terminates by the expiry of the term for which it is expressed to be made; or by the death of the employee before such expiry; or in any other manner in which a contract of service may be lawfully terminated or deemed to be terminated whether under the provisions of this Act or otherwise. In case of sickness or accident, due to which an employee is unable to fulfil a written contract of service, the contract may be terminated on the report of a registered medical practitioner.

Where a contract is terminated at the initiative of the employer, employer is required to give reasons to the employee for termination of employment. An employment contract cannot be terminated unless there is a valid reason for termination connected with worker’s capacity or conduct or the operational requirements of the undertaking. The following have been specified as reasons for unfair dismissals:

  1. Union membership or participation in union activities outside working hours or within working hours with the consent of the employer;
  2. seeking office as an employees’ representative;
  3. the filing of a complaint, the participation in proceedings against an employer involving alleged violation of laws or recourse to administrative authorities;
  4. race, colour, sex, marital status, family responsibilities, pregnancy, religion, political opinion or affiliation, ethnicity, tribal affiliation or social status of the employee; or
  5. absence from work during leave or a rest period in accordance with a written law.

Either party can terminate a contract by serving a notice or paying in lieu thereof. According to the Employment Act, notice period for terminating an oral employment contract is as follows unless an agreement specifies longer notice duration:

  1. 1 day (24 hours) when the contract is for a period of less than a week;
  2. 14 days when the contract is a daily contract under which wages are payable at intervals not exceeding 1 month (and not on daily basis); and
  3. 30 days when the contract is for a period of one week or longer

Notice to terminate the contract may be written or oral and may be given at any time.

In the case of economic dismissals/redundancies, employer has to provide notice of at least 30 days to the employee representative on impending redundancies and informing the representative on the number of employees affected by redundancy and the time period during which such contract termination would be carried out.

Source: §49-53 of the Employment Code Act, 2019

Severance Pay

Severance Pay is defined under the Employment Code Act of 2019 as “wages and benefits paid to an employee on contract termination.” The Act provides for the severance pay in the following cases:

  1. Termination of employment contract of a fixed duration: at least 25% of the employee’s basic pay earned during the contract period;
  2. Termination of employment due to redundancy: 2 months’ basic pay for each completed year of service;

Employee’s death in service: 2 months’ basic pay for each completed year of service;

Medical discharge: at least 3 months’ basic pay for each completed year of service.

Source: §38(6) and 54 of the Employment Code Act, 2019

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