2.1 Statutory requirements
The circumstances in which an employer or an employee may terminate a labour contract are specified by law.
- An employer may only terminate a labour contract unilaterally in the following circumstances:
- the employee repeatedly fails to perform the contracted work;
- the employee is being disciplined in the form of dismissal;
- the employee is suffering from an illness and remains unable to work for a considerable period of time;
- the employer is forced to reduce production and employment, after trying all measures to recover from force majeure events; or
the employer ceases operation.
In addition, an employee’s contract may be terminated on the grounds of retrenchment, subject to the statutory procedures described at 2.6 below.
The labour laws require employers to discuss and reach an agreement with the executive committee of the local trade union before the employer can unilaterally terminate a labour contract with an employee. Where no agreement is reached, the two parties must report to the local labour authority or organisation. In almost all cases, 30 days after the date of making that report, the employer may proceed with the termination of employment, except for the situation of discipline in the form of dismissal, for which the employer only needs to wait for a period of 20 days.
2.2 Notice periods
An employee engaged under an indefinite term labour contract may resign from their employment by giving the employer notice of 45 working days, or 3 days in the case that the employee is suffering from an accident or illness which has been treated for six consecutive months.
Other than in the case of discipline in the form of dismissal, an employer must provide notice of unilateral termination to the employee of 45 days for an indefinite term labour contract, 30 days for a definite term labour contract, and 3 days for a seasonal labour contract.
If either party fails to give adequate notice of termination, the party in breach must pay compensation to the other party of the amount equal to the employee’s salary that would otherwise have been paid for the days for which no notice was given.
2.3 Restrictions on the ability to terminate employment
Other than as provided by the Labour Code, termination of employment is prohibited. In addition, the Labour Code specifically prohibits termination of employment for any of the following reasons:
- because the employee is under medical treatment for an illness, labour accident or occupational illness;
- because the employee is on annual leave, personal leave or any other approved absence; or
- because the female employee is getting married, is pregnant, is on maternity leave or has a child under the age of 12 months.
If a female worker’s labour contract is lawfully terminated during the period she is pregnant, on maternity leave or nursing her child of less than 12 months, the termination of contract will be suspended for that period, except in the case of termination due to closure of the enterprise.
2.4 Remedies
An employee may make a claim of unlawful termination either to a local labour conciliation council (or labour conciliator) or a people’s court.
If successful, the employee may obtain a remedy of re-employment in accordance with the signed labour contract, plus backpay, plus additional compensation of at least two months’ salary. If the employee’s claim is successful but he/she refuses to return to work then, in addition to backpay and compensation, the employer must pay a retrenchment allowance of half a month’s salary for each year of service. If the employer refuses to re-employ the employee and the employee agrees, in addition to the aforementioned compensation and allowance, the two parties are to agree upon an additional amount of compensation to be paid by the employer to the employee in order to terminate the labour contract.
2.5 Severance payments
Severance is payable as follows:
- Except for termination due to discipline in the form of dismissal (not including dismissal due to the employee taking five days-off in one month or twenty days-off in one year without proper reason), an employee who has worked for more than one year is entitled upon termination of employment to receive a severance payment of a half month’s salary for each year of service up until 1 January 2009. From 1 January 2009, all employers must pay a compulsory unemployment insurance premium in respect of their employees. Therefore, the period of an employee’s employment post 1 January 2009 will not be included in the calculation of an employee’s severance allowance entitlement, provided that the employer and its employee have paid the relevant unemployment insurance premium in respect of the employee.
- If the termination is due to changes in structure or technology, an employee who has worked for more than one year is entitled to redundancy pay of one month’s salary for each year of employment, subject to a minimum payment of 2 months’ salary.
2.6 Specific requirements applicable to redundancy
In addition to the standard termination procedures, if more than one employee is to be retrenched in the context of restructuring or technology modernisation, the employer must publicise the list of employees whose contracts are to be terminated. This must be done after consideration of the company’s requirements and the length of service, skills, family conditions and other factors relating to the employees.