Unemployment and Termination Regulations

Unemployment is a hard situation to encounter. The labor law aims to provide protection to workers from unlawful termination. Was your termination legal? Are you entitled to compensation? Find out your rights on Prake.org

What does the law says about unemployment?

Suspension

The employment contract can be suspended for a range of reasons for up to 2 months. While the employment contract is suspended the employer is not required to pay wages and employee is not required to work. At the end of the suspension period, the employment relationship usually returns to normal.

An employment contract may only be suspended for two reasons:

-       Disciplinary suspension according to the company’s internal regulations, and

-       Serious economic problems of the enterprise, but the suspension must be under the supervision of the Ministry of Labor

Termination of Employment

By law, if an employer wants an employee to stop work, the employer must tell the employee in advance, as following:

Type of Contract

Length of Contract / Employment

Notice Period

Fixed Duration

6 months or less

No notice required

More than 6 months to 1 year

10 days

More than 1 year

15 days

Undetermined Duration

Less than 6 months

7 days

6 months to 2 years

15 days

More than 2 years to 5 years

1 month

More than 5 years to 10 years

2 months

More than 10 years

3 months

 

Unemployment Compensation

When an employee is terminated from their job, they are entitled to compensation from their employer. The type and amount of compensation depends on: 1) type of employment contract (fixed duration or undermined duration), 2) reason for termination and 3) if notice was provided to the employee.

Employees with a fixed duration contract are entitled to “severance payment”. Severance payment must be a t least 5% of the total wages paid to the employee during the length of the contract. For example, assume you signed a one-year contract with your employer. If you earned $700 during the year, including your basic wage, overtime and other benefits, then your severance pay should be $35 (5% x $700 = $35).

Employees with an undermined duration contract are entitled to “layoff compensation”. The amount of layoff pay depends on how long the employee has worked for the employer. If worked between 6 months to 1 year, he/she should receive 7 days of wages and benefits. If worked at the enterprise for over 1 year, he/she should get 15 days for each year of employment, up to 6 months wages and benefits. The employer does not have to pay layoff compensation if an employee resigns voluntarily, but must pay if the employer pushed an employee to resign.

The lawful process of termination is summarized in the table below. 

Type of Contract

Reason for Termination

Lawful Termination

Fixed Duration

At the end of term

No notice

Contract renewed for same term (or undetermined duration if total over 2 years)

Insufficient notice

5% severance + Payment in lieu of notice

Sufficient notice

5% severance

Before the end of term

By agreement

5% severance to date of termination, no notice

Any other reason

Wages for full contract + 5% severance

Serious misconduct

5% severance to date of termination, no notice

Undetermined Duration

Serious misconduct

No layoff compensation, no notice

Economic

Layoff compensation + notice

Other misconduct

Layoff compensation + notice

 

What is said in collective agreements about unemployment?

Existing collective agreements do not mention layoff process or compensation, and therefore, provide the same benefits as that stated in the law.

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