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Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Egypt

Notice period

In Egyptian labor law, specific notice periods are mandated for employers terminating indefinite-term employment contracts. The required notice period depends on the employee's length of service.

Notice Period Based on Length of Service

For employees with less than ten years of uninterrupted service, employers must provide written notice two months prior to the termination date. However, for employees who have served for ten years or more continuously, the notice period extends to three months before termination.

Exceptions to Notice Periods

Egyptian law exempts employers from providing notice in a few exceptions:

  • Fixed-Term Contracts: These contracts naturally terminate upon reaching the pre-determined end date, and no notice period is necessary.
  • Serious Misconduct: If an employee commits a severe offense, such as theft or violence, they can be dismissed immediately without notice.
  • Employee Initiated Termination: When an employee resigns and provides the stipulated notice according to their contract (if applicable), no employer notice is required.

Importance of Notice Periods

Adhering to the proper notice period is crucial for both employers and employees. Notice periods ensure employees have time to find new employment and financially prepare for the transition. Ignoring notice requirements might lead to legal challenges from the employee, potentially resulting in additional costs for the employer.

Severance pay

In Egypt, labor law mandates severance pay for employees in certain termination situations.

Severance Pay for Termination Without Cause

When an employer terminates an indefinite-term employment contract without a valid reason outlined in the Labor Law, the employee is entitled to severance pay. The calculation is as follows: employees receive one-half month's salary for each of the first five years of service, and one month's full salary for each year of service beyond the first five years.

Severance Pay in Economic Termination

If an employer terminates employment contracts due to economic reasons, severance pay is still due. The calculation is the same as severance pay for termination without cause.

Additional Severance Entitlement

Employees who resign after completing ten years of uninterrupted service are entitled to half the severance pay they would receive if terminated without cause.

Exceptions and Reductions

There are situations where full severance pay may not apply. If an employee is dismissed due to a serious offense outlined in the Labor Law, they may forfeit their severance pay entitlement. Employees who resign without providing their employer with adequate notice may have their severance pay reduced. Employees who reach retirement age and receive a pension may not receive additional severance pay.

Important Considerations

Severance pay calculations in Egypt use the employee's basic salary plus housing allowance. Severance pay must be paid to the employee at the time of termination. Employees have the right to challenge severance pay calculations or the grounds for dismissal through the labor courts.

Termination process

Egyptian labor law outlines specific procedures employers must follow to terminate an employee's employment. Here's a breakdown of the general process, along with essential legal considerations:

Termination by Employer

There are two primary ways an employer can terminate an indefinite-term employment contract in Egypt:

  • Termination Without Cause: The employer terminates the contract without providing a specific reason or without following a disciplinary process.

  • Termination for Cause (Disciplinary Dismissal): The employer terminates the contract following a disciplinary process after the employee commits a serious offense outlined in Article 62 of the Labor Law, such as repeated misconduct, insubordination, or disclosing trade secrets. In this process the employer should:

    • Issue a written warning to the employee.
    • Conduct an investigation and provide the employee an opportunity to defend their actions.
    • Issue a dismissal letter outlining the reasons for termination if guilt is established.
    • Notify the Ministry of Manpower within 7 days of the dismissal.

Termination by Employee

Employees in Egypt have the right to resign from their positions. They should provide a written resignation notice.

Termination due to Economic Reasons

If an employer is forced to reduce employees due to economic factors, specific procedures laid out in Article 70 of the Labor Law must be followed:

  • Notify Ministry of Manpower: The employer must submit a formal request outlining the reasons for termination and the number of employees affected.
  • Negotiation with Labor Union: The employer is required to engage in good-faith negotiations with the labor union (if applicable).
  • Fair Selection Criteria: Employees must be selected for termination based on objective criteria, such as seniority or performance.

General Procedural Requirements

  • Termination Letter: For all termination types, issuing a formal termination letter clearly outlining the reason for termination is recommended.
  • Ministry of Manpower Notification: Employers must notify the Ministry of Manpower of any termination, typically within one week.

The termination process can become more complex, especially in cases of disciplinary dismissal or collective termination due to economic reasons. Seeking guidance from an Egyptian labor law expert is strongly advised to navigate these situations and ensure compliance with all legal requirements.

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