Terminating an employment agreement is a tricky business, no matter where.  There are many factors that need to be taken into consideration to make sure that a company is compliant with local labor laws. Any misstep in the termination process can cost a company if it is not properly executed or handled with  care and sensitivity.

In general, each country has a list of recognised and accepted reasons for terminating an employee, and if the reason does not fall under what is recognized by law, the employer may have the right to file a claim with a labor court.

In this post, we’ll go over different termination laws in various countries around the world when it comes to the termination of an individual employee.

Europe

United Kingdom

In the United Kingdom, there is no formal termination process that must be followed when terminating an employment agreement.  In general, the termination must be deemed fair and justified.  When appropriate, warning should be given to an employee, so they are allowed enough time to correct their infractions claimed against them.  However, for the case of gross misconduct, there is no need to issue a warning, an employer can dismiss an employee with immediate effect.

The minimum mandatory notice varies based on the number of years of service:

• 1 week if the employee has been employed from one month- 2 years
• An additional 1 week for each year employed, up to 12 years
• 12 weeks for employees who have been employed for more than 12 years

Severance pay is not required.

If an employee is terminated due to redundancy, the employer must be able to show that the employee’s position is genuinely no longer needed.   In this case, the employee is entitled to redundancy pay if the following conditions have been met:

• The employee has been working under an employment contract
• The employee has been employed for at least 2 years
• The employee has been dismissed, laid off, or has been requested to work at reduced hours. If the employee chooses to enter into early retirement, they are not eligible for redundancy pay.

The amount to be paid out depends on the age of the employee and their length of employment and is capped at 525 GBP and 20 years of service, meaning that the maximum amount that the employee could receive is 15,750 GBP.

• Half a week’s pay for each year of service until the age of 22
• A weeks’ pay for each year of service from the ages of 22-41
• One and a half weeks’ pay from the age 41 and older

See our U.K payroll and employment guide for more details about paid time off, payroll and employer and employee taxes

France

In France, an employee may be dismissed for specific reasons that are laid out and recognized by French law.  Because of this, the dismissal of an employee must be handled with extreme care.

The employer must give the employee written notice summoning them to a meeting. Once the employee receives the notice, they are given 5 working days until the meeting.

During the meeting, the employer must go over the reasons for their contemplation of dismissing the employee, and the employee is able to make their counterclaims.  The employer is not allowed to make any final decisions until 2 days after the meeting.  If the employer decides to move forward with the termination, a letter is sent to the employee by registered mail.

The employee is entitled to advance notice based on the length of their employment or position:

• 6 months-2 years of employment- 1 months’ notice
• 2+ years of employment- 2 months’ notice
• Executives- 3 months’ notice
• In the case of gross misconduct, the employment agreement can be terminated with immediate effect.

Severance pay depends the length of employment:

• 25% of the gross monthly salary for every year of employment for up to 10 years
• 33% of the gross monthly salary for every year of employment after 11 years of employment

The average gross salary is based on the following, and the most favourable outcome for the employee must be used:

• Average of one months’ salary of the past 12 months
• Average of one months’ salary of the entire duration of the employment
• One-third of the total of the last 3 months of pay

When it comes to redundancy, an employee who has been employed for at lease 8 months is entitled to severance pay.

See our France payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

Germany

Termination is monitored in Germany to ensure that dismissals are justified.  An employer must notify the employee with written notice.  Notice period is 4 weeks, however, for employees who have over 20 years of employment, the notice period is 7 months.

When there is a justified reason for the termination and proper notice is given, severance pay is not mandatory.  However, for redundancy, severance is required which is equal to half a months’ salary for ever year of employment.

See our German payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

Netherlands

In the Netherlands, labor laws are in favor of the employee, and the termination procedure must be followed. It is very common for employees to file claims against their employer with the labor courts.

There are 5 ways you are able to terminate an employment agreement: mutual consent, approval from the Dutch Employment Insurance Agency, termination through the cantoral court, termination with consent of the employee, or urgent dismissal.

The length of the notice period depends on the length of employment:

• Less than 5 years of employment- 1 months’ notice
• 5-10 years of employment- 2 months’ notice
• 10-15 years of employment- 3 months’ notice
• 15+ years of employment- 4 months’ notice

Severance pay is calculated based on the following:

• 1/6 monthly salary for every 6 months of employment, capped at 10 years
• 1/4 monthly salary for every 6 months of employment after 10 years
• An additional one months’ salary for every year employed after the age of 50

If an employee is terminated due to redundancy, the employer must request permission from the Employee Insurance Agency to terminate an employment agreement.

See our Netherlands payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

Spain

Spanish labor laws require that the employee must give notice when terminating an employee in writing.

Notice period is 15 days, however, it is common to have a longer notice period written in the employment contract. If an employee is terminated due to misconduct, no notice is necessary; the employee can be terminated with immediate effect.

Employers in Spain must pay severance pay equivalent to 20 days of the monthly salary for every year the employee has been employed. Severance pay also covers employees who have been dismissed due to redundancy.  The only requirement for severance pay is that the employee must have completed at least 1 year of employment.  If the employee is dismissed on the grounds of misconduct, they are not entitled to severance pay.

See our Spain payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

 

America

Canada  

In Canada, termination varies from one territory to the next. In this article, we will be going over termination based on the Canada Labour Code and falls under federal labor standards.

If an employer in Canada would like to dismiss an employee, the employer must provide a termination letter in writing with just cause.  If the employee has been employed for at least 3 months, 2 weeks’ notice must be given to the employee, or pay in lieu for the equivalent amount of 2 weeks’ wages.

When an employee is dismissed and has completed at least one year of employment, they are entitled to severance pay which is 2 days’ pay for every year worked.  However, the minimum number of days that the employee is entitled to is 5 days.

When it comes to redundancy, the same laws apply as a regular dismissal.

See our Canada payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

For companies wanting to hire without a local entity see our Canadian PEO service

Mexico

Mexican labor law makes terminating an employee quite difficult.  An employer is not able to dismiss an employee at will, rather, the reason for termination must fit the criteria outlined in the labor code.

The employer must provide the employee with written notice stating the cause for termination.  In addition, the letter must include proof (including dates) of when the employee committed acts that are considered cause for the termination.

There is no statutory notice period in Mexico, and in general, the employment ceases on the day that the employee is informed of the termination.

If the termination is deemed just, the employee is not required to pay the employee severance pay.  However, it the employee files a claim with the labor court and it is determined that the cause for termination was unjust, the employee will either have to reinstate the employee or pay severance.  Severance pay is calculated at 3 months’ salary, 20 days of pay for every year the employee was employed, and a seniority bonus equal to 12 days of pay for every year employed.

In order to avoid this, it is quite common for employees to negotiate settlements with the employee.  Once a termination agreement is reached, it is recommended that it be signed.

There are no provisions in the labor law outlining dismissals based on redundancy.  Therefore, the employer would need to follow the regular dismissal procedure.

Lastly, the employer must file proper documentation with the authorities when an employee is terminated.

See our Mexico payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

Asia and the Pacific

China

Labor laws are in favor of the employee when it comes to termination in China, and it is important to note that in each providence, the laws may vary.  After the probation period has ended, it becomes increasingly difficult to terminate an employee.  Before the employee can be terminated, the employee must be allowed to undergo training or be transferred to a different position within the company.  If the employee is still not fit for their responsibilities after these steps have been taken, it is possible to begin the termination process.

The employer must provide written notice to the employee as well as 30 days’ notice.

In most cases, employees are entitled to severance pay, with the exception of:

• The employee is on probation and demonstrates the inability to perform their duties
• The employee is in breech of company laws

Severance pay is generally one months’ wages for employees who have been employed for over 1 year and should receive one month for every year employee.  If the employee has been employed for 6 months or less, severance pay is half a months’ wages.  It is also important to note here that employment duration is always rounded up (i.e. completion of 7 months of employment is rounded up to 1 year for calculation purposes).  Severance pay is capped at 12 months.

There is no applicable law for terminating an employee due to redundancy.  In this case, the employer would need to negotiate a mutual termination with the employee.

See our China payroll and employment guide for more details about paid time off, payroll and employer and employee taxes in China. 

See our China PEO service if you’re looking to hire in China without a local entity

Singapore

In Singapore, the laws that govern labor (including termination) is the Employment Act, however, not all employees are covered by the employment act.  Each contract is required to include a clause regarding termination, which outlines the duties of both the employee and employee must fulfill in the event of an employment termination.

To terminate an employment contract after the end of the probation period, an employer must give notice in writing and severance pay is not required by law. Notice is based on the duration of employment:

• Less than 2 weeks of employment- 1 days’ notice
• 26 weeks- 2 years of employment- 1 weeks’ notice
• 2-5 years of employment- 2 weeks’ notice
• 5+ years of employment- 4 weeks’ notice

For termination based on misconduct, the employer can terminate the employment agreement with no notice.

There are no laws regarding termination based on redundancy, however, there are laws based on termination for retrenchment.

See our Singapore payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

Australia

In Australia, the employer must provide written notice to the employee. The reason for termination must be considered a valid reason.

Notice is based on the number of years the employee has been employed:

• Less than 1 year of employment- 1 weeks’ notice
• 1-3 years of employment- 2 weeks’ notice
• 3-5 years of employment- 3 weeks’ notice
• 5+ years of employment- 4 weeks
• If the employee is over the age of 45 years and have been employed for at least 2 years, they are entitled to an additional week of notice.

However, if the employee is terminated based on gross misconduct, no notice is required.

Severance pay is also based on the number of years employed:

• At least 1 year but less than 2 years of employment- 4 weeks
• At least 2 years but less than 3 years of employment- 6 weeks
• At least 3 years but less than 4 years of employment- 7 weeks
• At least 4 years but less than 5 years of employment- 8 weeks
• At least 5 years but less than 6 years of employment- 10 weeks
• At least 6 years but less than 7 years of employment- 11 weeks
• At least 7 years but less than 8 years of employment- 13 weeks
• At least 8 years but less than 9 years of employment- 14 weeks
• At least 9 years but less than 10 years of employment- 16 weeks
• At least 10 years of employment- 12 weeks

In the event an employee is terminated due to redundancy, they are entitled notice as well as redundancy pay.  There are many factors that go into determining the amount of notice and pay the employee is entitled to, including: skill level, age, and if they are a full-time or part time employee.

See our Australia  payroll and employment guide for more details about paid time off, payroll and employer and employee taxes.

See our Australia PEO service if you’re looking to hire in China without a local entity