The rules on severance pay in detail

Employees with at least three years of service who are dismissed with notice for a reason connected to the operation of the employer or for medical reasons are entitled to statutory severance pay. The same rule applies if the employment is terminated because the organisation no longer exists.

Statutory severance pay is calculated on the following basis:

Length of Service Severance Pay
3 years 1 month
5 years 2 months
10 years 3 months 
15 years 4 months
20 years 5 months
25 years 6 months

 

In the employment contract the parties may agree on different severance pay amounts.

If the employee is within five years of retirement when made redundant for a reason connected to the operation of the employer, the statutory severance pay is as follows:

Length of Service Severance Pay
3 years 2 months
5 years 3 months
10 years 5 months
15 years 6 months
20 years 8 months
25 years  9 months

 

No severance needs to be paid to a retired employee (i.e. a person who claims a pension in addition to working on an indefinite term contract with the employer). Nor is severance payable if the reason for termination is connected with the employee’s performance (i.e. the employee’s abilities rather than medical reasons) or the behaviour of the employee.

When calculating the monthly pay the following must be taken into account:

  • basic salary;
  • where relevant, the pro-rated part of the salary based on the employees’ performance, paid in the previous six months;
  • where relevant, the shift and overtime allowances paid in the previous six months.
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Author: CLV Partners

Date: December 2018

 

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