FAQ Category
The Labour Act 2017 refers to severance pay as terminal benefit for employees incase of:
- Redundancy
Labour Act 2017 section 77: 3 and 4 states that
- (3)Subject to sub-section(4)below, an employee whose employment is terminated on account of redundancy, after continuous service of one year or more, shall be entitled to receive, in addition to any other entitlements due to such employee upon termination, severance pay equal to two week wages/salaries for each completed year of continuous service with the employer.
- (4)In the event of redundancy due to the insolvency of the employer, the Insolvency Act 2011 shall govern an employee claim for wages/salaries, severance pay and other entitlements
- Death or insolvency of the employer, physical incapacity or unfair termination
Labour Act 2017 section 80 states that
1. Subject to this Act, an employer shall pay severance allowance where an employee has been in his or her continuous service for a period of six months or more and where any of the following situations apply:
- (a)the employee is unfairly dismissed by the employer;
- (b)the employee dies in the service of his or her employer;
- (c)the employee terminates his or her contract because of physical incapacity;
- (d)the contract is terminated by reason of the death or insolvency of the employer; and
- (e)such other circumstances as the Minister may by regulations provide.
2. No severance allowance shall be paid in circumstances where an employee:
- (a)is summarily dismissed with justification;
- (b)abandons his or her employment, or absconds from his or her place of work without leave for a period of more than seven days without any explanation being provided to the employer; and
- (c)contract which is terminated is a probationary contract.
3. Calculation of severance pay shall be negotiable between the employer and the employees or the trade union that represents them.
** NGO Forum advices members to come up with their own conclusion based on its own legal opinion from their lawyers/law firms