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Termination and Severance Policies

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

Notice period

In Ethiopia, the Labor Proclamation No. 1156/2019 outlines the legal requirements for notice periods during employment termination. The required notice period is determined by an employee's service duration after completing their probationary period.

Notice Period Based on Length of Service

The Proclamation stipulates the following notice periods:

  • One Month: For employees with a service period of not more than one year.
  • Two Months: For employees with a service period exceeding one year but less than nine years.
  • Three Months: For employees with a service period exceeding nine years.

It's important to note that these notice periods apply to both employer-initiated and employee-initiated terminations, with a few exceptions.

Exceptions to Notice Periods

The Proclamation also outlines situations where the standard notice periods might not apply:

  • Probationary Period: During the probation period (maximum of three months), either party can terminate the employment without notice.
  • Fixed-Term Contracts: If the employment contract has a pre-determined end date, notifying the employee of the project's completion serves as sufficient notice.
  • Summary Dismissal: In cases of serious misconduct by the employee, the employer can dismiss them summarily without notice.

Additional Considerations

The Proclamation also emphasizes the importance of providing a written notice specifying the reasons for termination and the effective date. Additionally, the employer can choose to pay the employee their salary for the notice period instead of requiring them to work during that time.

Severance pay

Severance pay in Ethiopia is regulated by the Labor Proclamation No. 1156/2019. This legislation outlines the circumstances under which severance pay is entitled and how it is calculated.

Circumstances for Severance Pay Entitlement

Severance pay is generally payable in the following situations:

  • Involuntary Termination: If the employer terminates the employment contract without a valid reason for summary dismissal as per Article 34 of the Proclamation.
  • Redundancy: If the employee's role becomes redundant and the employer can no longer justify their continued employment.
  • Partial or Full Closure of Business: If the employer partially or fully closes the business due to economic reasons or force majeure.
  • Employer's Illness or Death: Severance may be payable if the employer becomes incapacitated for an extended period or dies, leading to the closure of the business.

Circumstances for Non-Entitlement of Severance Pay

Severance pay is typically not payable in the following circumstances:

  • Voluntary Resignation: Employees who resign voluntarily from their position do not qualify for severance pay.
  • Summary Dismissal for Misconduct: If an employee is summarily dismissed due to gross misconduct outlined in Article 34 of the Proclamation, they forfeit their right to severance pay.
  • Completion of Fixed-Term Contract: If a fixed-term contract ends on its predetermined expiry date, severance pay may not be due, depending on the wording of the contract.

Calculation of Severance Pay

If an employee qualifies for severance pay, the amount is calculated based on their length of continuous service as per Article 33:

  • Base Calculation: 30 days' wages for the first year of service. For each additional year, the severance pay increases by 10 days' wages.
  • Maximum Cap: The total severance pay entitlement cannot exceed 12 months' wages of the employee.

Additional Information

Specific provisions in collective bargaining agreements may enhance severance pay entitlements beyond what is outlined in the Labor Proclamation.

Termination process

The termination of employment in Ethiopia is governed by the Labor Proclamation No. 1156/2019. This process is structured and involves several key steps and legal considerations.

Termination with Notice

In most cases, both employers and employees are required to provide advance notice of termination. While an initial verbal notice is acceptable, it must be followed up with a written notice. This written document should detail the reasons for termination and the effective date. Alternatively, an employer or employee may choose to waive the notice period and instead make a payment in lieu of notice.

Reasons for Termination

The Labor Proclamation outlines valid reasons for an employer to initiate termination. These include redundancy, incapacity to perform work, operational requirements, and misconduct. In the case of misconduct, serious breaches of the employment contract or company policies can justify termination. However, for less severe cases, the employer must follow a progressive disciplinary process first.

Summary Dismissal

An employer can summarily dismiss an employee without notice only in very limited cases of gross misconduct, such as theft, violence, or gross insubordination. Even in these cases, the employer must provide the employee an opportunity to respond to the allegations before making the final decision.

Unfair Dismissal

Employees who believe their termination was unfair have recourse with the Labor Relations Board. If the Board finds the dismissal to be unfair, it might order reinstatement, compensation, or other remedies.

Important Considerations

Specific terms in the employment contract may provide for longer notice periods or enhanced severance packages compared to the Proclamation's baseline. Additionally, provisions in collective agreements can significantly influence termination procedures.

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