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Termination and Severance Policies

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

Notice period

The Labour Act, 2003 (Act 651) in Ghana stipulates the notice periods for employment termination. The required notice period for termination is contingent on the duration of the employment contract as outlined in Section 57(2) of the Labour Act.

Notice Period Based on Contract Duration

For contracts of three years or more, employers or employees must provide one month's written notice before termination. Alternatively, one month's pay can be offered "in lieu of notice." For contracts less than three years, two weeks' written notice is required from either party. Similarly, two weeks' pay can be provided instead of notice. For weekly contracts, seven days' written notice is sufficient for termination by either employer or employee.

Exceptions to Notice Periods

The Act allows for some exceptions to the standard notice periods. If an employment contract includes an "at will" clause, termination can occur at any time without notice. However, such clauses are uncommon in Ghana. Under Section 60 of the Labour Act, an employer may dismiss an employee immediately (without notice or pay in lieu) for serious misconduct like theft, fighting, or gross negligence.

Importance of Written Notice

The Labour Act emphasizes the importance of written notice (Section 57(2)). Even when "pay in lieu" is offered, a written notice outlining the termination details is considered best practice.

Additional Considerations

Industry-specific collective bargaining agreements may supersede the Act's notice period requirements. It's advisable to consult the relevant agreement if applicable. If the termination is deemed unfair (e.g., due to discrimination), the employee may be entitled to compensation beyond the mandated notice period.

Severance pay

Severance pay in Ghana is primarily governed by the Labour Act, 2003 (Act 651). The primary instance where severance pay is mandated by law in Ghana is in cases of redundancy. Redundancy occurs when a worker's position becomes obsolete or the company restructures, resulting in a reduced workforce.

Eligibility for Severance Pay

Severance pay entitlements under the Labour Act do not apply to all employees. Casual and temporary workers, employees on probation, and employees who have not completed the minimum service period (usually specified in an employment contract or collective agreement) are not covered.

Calculating Severance Pay

Unlike many countries, Ghana does not have a legally mandated formula to calculate severance pay. The amount is typically determined through negotiation between the employer and employee (or their trade union representative). Factors that may be considered during negotiation include length of service, the employee's salary level, and the circumstances of the redundancy. In some sectors, collective bargaining agreements may specify severance pay calculations or minimum amounts.

Other Entitlements Upon Redundancy

Besides severance pay, employees made redundant are entitled to any outstanding salary and accrued vacation pay.

Important Notes

Severance pay is not applicable in case of dismissals due to reasons such as misconduct. Employment contracts or collective agreements may provide for more favorable severance terms than the legal minimums.

Termination process

Termination of employment contracts in Ghana can occur due to various reasons. The Labour Act, 2003 (Act 651) sets out the legal framework governing termination procedures.

Types of Termination

Termination can be initiated by either the employer or the employee, or mutually agreed upon by both parties.

Termination by Employer

The employer may terminate the employment contract on grounds such as:

  • Worker's incompetence or lack of qualification
  • Proven misconduct
  • Redundancy
  • Legal restriction preventing the worker from performing their duties

Termination by Employee

An employee can terminate their contract by providing the required notice.

Mutual Termination

Both employer and employee can mutually agree to terminate the contract.

Termination Procedure

The termination procedure involves several steps:

  1. Written Notice: Provide a written termination notice clearly stating the reason for termination and the effective date.

  2. Fair Procedure: Ensure the reason for termination is valid and that the employee is given a fair opportunity to respond to any allegations (especially in cases of misconduct). Section 62(3) of the Labour Act outlines the requirement of a fair hearing.

  3. Payment of Entitlements: Upon termination, the employer must pay the employee all outstanding entitlements, including accrued salary and accrued leave pay.

Unfair Termination

If an employee believes their termination was unfair, they can lodge a complaint with the National Labour Commission (NLC). If the NLC finds the termination unfair, they may order reinstatement, re-employment, or payment of compensation.

Important Considerations

Always refer to the terms of the employment contract or any applicable collective agreement, as they may provide for additional procedures or benefits. Some sectors may have specific regulations regarding termination.

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