The Ministry of Labor and Vocational Training has issued the notification dated 21st March 2024 on compensation for employment contract termination.

The notification clarifies the monetary compensations an employer must pay to an employee upon termination of a fixed-duration contract (FDC) or an undetermined duration contract (UDC) in the following circumstances under the Labour Law: (i) termination without valid reasons, (ii) termination due to an employee’s serious misconduct under Article 83 of the Labour Law or company’s internal rules, and (iii) termination due to bankruptcy.

(i) Termination without valid reasons:
FDC: Unpaid wages, payment in lieu of unused paid leave, severance pay of at least 5% of wages earned during employment, and damages equal to or greater than wages the employee would have earned until contract expiry; and

UDC: Unpaid wages, payment in lieu of unused paid leave, wages for the prior notice period (if applicable), seniority indemnity for the last semester and unpaid seniority indemnity back pay, and damages equal to the seniority indemnity

(ii) Termination due to employee’s serious misconduct:
FDC: Unpaid wages and payment in lieu of unused paid leave; and

UDC: Unpaid wages and payment in lieu of unused paid leave

(iii) Termination due to bankruptcy:
FDC: Unpaid wages, payment in lieu of unused paid leave, and severance pay of at least 5% of wages earned during employment; and

UDC: Unpaid wages, payment in lieu of unused paid leave, wages for the prior notice period (if applicable), and seniority indemnity for the last semester and unpaid seniority indemnity back pay.

Note: The notification emphasizes that in cases of contract termination due to bankruptcy, the employer is not obligated to pay damages.