The rules on severance pay in detail

The employer must pay the employee severance compensation in cases of dismissal for physical or mental unfitness, based on the terms of the applicable collective bargaining agreement and/or individual employment agreement. However, the law does not specify the amount of this compensation. If there is no internal or contractual provision to determine the amount, employers tend to offer at least one month’s basic salary, to show good will.

The law also provides that employees dismissed for redundancy may be granted severance compensation on the conditions set out by law and the applicable collective bargaining agreement. Again, no specific amount is set out in law.

This means that severance payments for dismissal on any grounds must only be paid if this is regulated by a collective agreement and/or the employment contract. In practice, severance is calculated on a case-by-case basis. For example, in cases of redundancy, to reduce the risk a challenge in court, employers often agree a mutual termination agreement which pays out more to the employee than they would be entitled to under the redundancy rules.

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Author: Nestor Nestor Diculescu Kingston Petersen

Date: December 2019