Notice and Severance

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Notice Requirement

The contract of employment can be terminated by the employer on disciplinary grounds; or non-disciplinary grounds; or death or operation of law, (this category would include termination of the contract of employment due to factors such as frustration of contract and impossibility of performance); or an act of the employee which may arise in a variety of circumstances such as resignation, vacation of post or abandonment of employment. In case of fixed term contract, it would terminate by reaching the term of fixed period, as specified under the contract.

In accordance with the terms of TEWA, the employer is required to inform the employees of the reasons for dismissal except for disciplinary dismissal) However, any dismissal of a worker covered by the Termination of Employment of Workman Act (TEWA) which is not a disciplinary dismissal cannot take place without the prior written consent of the workman or the prior written approval of the Commissioner of Labour. However, cases where written approval is not required, include voluntary resignations by employees; retirements on the date clearly specified in the letter of appointment; retirements according to a provision of a collective agreement; termination by reaching the end of the fixed term; termination by operation of law.

The law requires termination notice before terminating services of an employee. However, the law does not deal with individual dismissals rather it talks only about retrenchment (collective dismissals). Workers may be retrenched only after giving at least one month’s notice. A worker is eligible for this one month notice only after one year of service. A worker with less than one year of service is not entitled to any notice.

Source: §31 of the Industrial Dispute Act, 1950

Severance Pay

Workers who have completed five years of service with an employer employing fifteen or more workmen, are entitled to gratuity at following rates in the event of termination (whether by the employer or workman, or on retirement or by the death of the workman, or by operation of law, or otherwise) of the services:

  1. Half a month’s wages or salary for each completed year of service for monthly rated workmen; and
  2. 14 days salary for each year of completed service for other workmen.

This amount is payable in every circumstances whatever the reason for termination may be, (resignation, dismissal, retirement, death of the worker, by operation of law, or otherwise), and may only be withheld in certain narrowly defined instances.

Source: §5 & 6 of Payment of Gratuity Act

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