Navigating employment termination in Ghana requires a thorough understanding of the country's labour laws, primarily governed by the Labour Act, 2003 (Act 651). Compliance with these regulations is essential to ensure fair treatment of employees and to mitigate legal risks for employers. Proper procedures must be followed regarding notice periods, grounds for dismissal, and severance entitlements.
Understanding the legal framework surrounding termination is crucial for any employer operating in Ghana. This includes recognizing the different requirements based on the type of employment contract and the reasons for ending the employment relationship, ensuring all steps are taken in accordance with the law.
Notice Period Requirements
The Labour Act specifies minimum notice periods for terminating an employment contract, which vary depending on the frequency of wage payment or the duration of employment. These minimums apply unless a longer period is stipulated in the employment contract or a collective agreement.
Here are the minimum statutory notice periods:
| Payment Frequency / Employment Duration | Minimum Notice Period |
|---|---|
| Daily or hourly paid employees | 24 hours |
| Weekly paid employees | 7 days |
| Monthly paid employees | 2 weeks |
| Employees employed for 3 years or more | 1 month |
It is important to note that notice must be given in writing. An employer can also pay the employee in lieu of notice, which means paying the employee their full wages and benefits for the duration of the required notice period instead of having them work through it.
Severance Pay
Severance pay in Ghana is typically required in cases of redundancy. Redundancy occurs when an employer ceases or intends to cease to carry on the business, or when the requirements of the business for employees to carry out work of a particular kind or at a particular place cease or diminish.
The Labour Act does not prescribe a specific statutory formula for calculating severance pay. Instead, it mandates that in the event of redundancy, the employer must negotiate with the worker or the worker's representative (such as a trade union) on the terms and conditions of the redundancy pay.
Factors commonly considered in determining severance pay include:
- Length of service
- Employee's salary
- Terms of the employment contract
- Any applicable collective bargaining agreement
- Industry practice
While there is no fixed formula, common practice often involves a calculation based on the employee's length of service, such as a certain number of weeks' or months' pay per year of service. The negotiated agreement must be fair and reasonable.
Grounds for Termination
Employment contracts in Ghana can be terminated on various grounds, broadly categorized as termination with cause and termination without cause (such as redundancy).
Termination with Cause:
An employer may terminate an employee's contract for just cause, which typically relates to the employee's conduct or capacity. Valid grounds include:
- Misconduct: Serious breaches of company rules, dishonesty, insubordination, theft, or other actions that fundamentally undermine the employment relationship.
- Poor Performance: Consistent failure to meet performance standards despite receiving warnings and opportunities for improvement.
- Incapacity: Long-term illness or disability preventing the employee from performing their duties.
- Breach of Contract: Violation of material terms of the employment agreement by the employee.
For termination based on misconduct or poor performance, a fair procedure must be followed.
Termination Without Cause:
Termination can also occur for reasons not directly related to the employee's fault, such as:
- Redundancy: As mentioned, this is due to operational requirements of the business.
- Mutual Agreement: The employer and employee agree to end the employment relationship.
- Expiration of Fixed-Term Contract: The contract ends on its agreed date without renewal.
- Retirement: The employee reaches the mandatory or agreed retirement age.
Procedural Requirements for Lawful Termination
To ensure a termination is lawful and avoids claims of wrongful dismissal, employers must adhere to specific procedural steps, particularly when terminating for cause (misconduct or poor performance) or redundancy.
Key procedural steps often include:
| Step | Description | Key Documentation |
|---|---|---|
| Investigation | Conduct a fair and impartial investigation into the alleged misconduct or performance issue. | Investigation report, witness statements, evidence gathered. |
| Warning(s) | Issue written warning(s) detailing the issue, required improvement, and consequences of failure (for performance or minor misconduct). | Written warning letters (first, final). |
| Opportunity to be Heard | Give the employee a chance to respond to the allegations or performance concerns. | Minutes of disciplinary hearing/meeting, employee's written response. |
| Decision | Make a decision based on the findings of the investigation and the employee's response. | Decision outcome document. |
| Written Notice | Provide the employee with a formal written termination letter stating the reason and effective date. | Termination letter. |
| Final Payment | Calculate and pay all outstanding entitlements, including salary up to the termination date, accrued leave pay, and any applicable severance. | Final pay slip, record of payment. |
| Handover/Exit | Facilitate the return of company property and completion of exit formalities. | Checklist of returned property, exit clearance form. |
Common pitfalls in the termination process include failing to conduct a proper investigation, not providing the employee an opportunity to be heard, issuing insufficient or no warnings for performance issues, lacking proper documentation for each step, and failing to pay all final entitlements correctly and on time.
Employee Protections Against Wrongful Dismissal
Ghanaian law provides employees with protection against wrongful dismissal. A dismissal can be deemed wrongful if it is:
- Unfairly Grounded: The reason for termination is not valid or does not constitute just cause under the law.
- Procedurally Unfair: Even if a valid reason exists, the employer failed to follow the correct legal or contractual procedures (e.g., no investigation, no hearing, insufficient notice).
Employees who believe they have been unfairly or wrongfully dismissed can seek redress. The primary body for handling such disputes is the National Labour Commission (NLC). The NLC attempts to mediate and resolve disputes. If mediation fails, the case may proceed to arbitration or the Labour Court.
Remedies for wrongful dismissal can include:
- Reinstatement: The employee is returned to their former position (though this is less common in practice).
- Compensation: The employer is ordered to pay the employee financial compensation, which may include lost wages and other damages. The amount is determined based on factors like length of service, salary, and the circumstances of the dismissal.
Employers must therefore ensure both the reason for termination is valid and the process followed is fair and compliant with the Labour Act and the specific employment contract terms to avoid potential wrongful dismissal claims.
