The rules on severance pay in detail
Regardless of the reason for dismissal, an indefinite employment contract may be unilaterally terminated by the employer either by:
- notice, the duration of which is based on the employee’s seniority within the company;
- paying severance in lieu of notice, corresponding to the pay and benefits the employee would have received during the notice period if notice had been served. In that case, the employment contract is terminated with immediate effect.
Where severance is paid, this is calculated based on the total annual gross pay to which the employee is entitled at the moment of dismissal, including both fixed pay and benefits, as follows:
- fixed monthly remuneration;
- year-end premium (i.e. one month’s pay);
- double holiday pay (i.e. 0.92% of one month’s remuneration);
- all fringe benefits including:
- variable pay to which the employee was entitled in the last 12 months of employment;
- employer’s contribution to meal vouchers;
- employer’s contribution to group insurance and/or hospitalisation and/or life insurance cover;
- eco vouchers;
- private use of mobile phone, laptop and/or company car;
- stock options (though the value to be included in the computation base is the subject of debate).
Certain additional indemnities may be payable in following circumstances:
- If there are specific provisions on a sectorial level (this applies to a minority of joint committees);
- Where the person being dismissed is an employee representative on a works council, committee for prevention and protection at work, or is a member of a trade union delegation, in which case, very specific dismissal procedures must be complied with - and if not, very high indemnities of up to eight years’ remuneration are payable;
- Where the person to be dismissed is a protected employee (e.g. on ‘time credit’, parental leave, pregnancy leave, educational leave, or has filed a complaint for psychosocial risks, such as sexual harassment, bullying, or violence), in which case additional indemnities of three to six months’ remuneration are payable;
- The dismissal was manifestly unreasonable, in which case, an indemnity of between three and 17 weeks’ pay is payable, depending on the degree of unreasonableness;
- There is a restructuring, collective dismissal or the closure of the company or division.
Author: Claeys & Engels
Date: December 2018