2.1 Statutory requirements
The circumstances in which termination of employment is permitted are restricted under the LSA.
Termination with notice and severance pay
An employer may terminate employment only in the following circumstances, provided that notice and severance pay entitlements are met:
- The employer is ceasing business or the ownership of the employer is transferred.
- The employer suffers a loss or curtails business operations.
- The operations of the employer are suspended for more than 1 month due to force majeure.
- The business nature of the employer is altered, a reduction in the number of employees is necessary, and there are no other suitable job openings for the redundant employees.
- The employee is proved to be incapable of carrying out the work assigned to them.
Immediate termination without severance pay
An employer may terminate employment with immediate effect and without payment of severance in the following circumstances:
- The employee misrepresents facts at the time of signing the employment contract, thereby misleading the employer.
- The employee commits violence against or insults the employer or fellow employees.
- The employee seriously breaches the employment contract or violates the work rules.
- The employee is sentenced to imprisonment by a court of final judgment, and is not given a suspension of punishment or allowed to commute the imprisonment to a fine.
- The employee wilfully causes damage to machinery or other property of the employer, or intentionally discloses technological or business secrets of the employer.
- The employee is absent from work for 3 consecutive days, or for 6 days within one month, without justifiable reasons.
Resignation by employee
An employee may resign from his/her employment by giving prior notice to the employer.
- An employee may also resign immediately in the following circumstances, without giving prior notice, and will be entitled to severance pay upon resignation under these circumstances:
- The employer misrepresented any fact at the time of signing the employment contract, thereby misleading the employee.
- The employer commits violence against or severely insults the employee.
- The work specified in the employment contract is detrimental to the employee’s health and the employer has not improved the situation after receiving notice of the danger.
- The employer fails to pay remuneration as prescribed in the employment contract.
- The employer breaches the employment contract or the labour laws in such a way that might cause damage to the employee.
2.2 Notice periods
Where an employer or an employee is required to give notice of termination of non-fixed term employment, the following notice periods apply:
- For an employee with more than 3 months but less than one year’s service, 10 days’ notice.
- For an employee with more than one year but less than 3 years’ service, 20 days’ notice.
- For an employee with more than 3 years’ service, 30 days’ notice.
An employee is entitled to paid leave of up to 2 working days per week during the notice period for the purpose of finding a new job.
An employer may elect to make payment in lieu of the notice period.
2.3 Restrictions on the ability to terminate employment
Pursuant to the Employment Services Act, an employer may not dismiss an employee on the basis of race, class, language, beliefs, religion, political party, place of origin, place of birth, sex, sexual orientation, age, marital status, appearance, facial features, physical or mental disability or membership of a labour union. Furthermore, a female employee must not be dismissed during maternity leave, in accordance with the Gender Equality in Employment Act.
Pursuant to the Occupational Accident Labour Protection Act, an employee must not be dismissed if they are recovering from an occupational injury or illness, unless certified as being mentally or physically incapable of work.
2.4 Remedies
An employee who has been dismissed for legitimate reasons, but without appropriate notice or severance, may file a claim for payment in respect of the notice period and severance amount.
An employee who has been dismissed without a legitimate reason may pursue a claim for unlawful termination. If successful, the court may order reinstatement and backpay.
2.5 Severance payments
Severance payments must be made within 30 days of termination of employment. Any purported agreement by an employee to forego their severance payment is invalid and unenforceable.
An employee's severance payment will depend on whether or not the employee is a participant in the pension scheme under the Labour Pension Act, which took effect on 1 July 2005. Hence, employees may be divided into 2 categories:
- Labour Pension Act Employees: This will include all local employees hired on or after 1 July 2005, as well as all employees who were hired prior to 1 July 2005 and who elected on or after 1 July 2005 to transition over to the new pension scheme under the Labour Pension Act.
- Non-Labour Pension Act Employees: This will include all foreign employees (as foreigners are not eligible to participate in the state pension scheme), as well as all employees who were hired prior to 1 July 2005 and who have not elected to transition over to the new pension scheme under the Labour Pension Act.
For Labour Pension Act Employees, severance pay is calculated as follows:
- one month’s pay per year of service, for each year of service (if any) rendered with the employer prior to commencing participation in the new pension scheme (no maximum cap applies to this component); plus
- one half month’s pay per year of service, for each year of service rendered with the employer after commencing participation in the new pension scheme (up to a maximum cap of 6 months’ pay).
For Non-Labour Pension Act Employees, severance pay is calculated as one month’s pay per year of service for each year of service rendered with the employer (no maximum cap applies).
2.6 Specific requirements applicable to redundancy
The Massive Layoff Protection Act sets out additional obligations that apply to employers proposing to implement mass redundancies, as defined in the legislation. Where the legislation applies:
- 60 days’ advance notice and public announcements must be given to the labour union, the Labor-Management Conference or the affected employees in relation to the redundancies;
- the redundancy plans must be presented to the government authorities by the employer; and
- the employer must engage in consultations with the employees/unions within 10 days from submission of the redundancy plan to the government authorities.