Termination of employment- 15+1 useful information
In addition to the legal implications of the notice period, we explain in detail how it affects payroll and what strategies can be used to ensure that payroll processes run smoothly during a period of change. Our aim is to show how payroll expertise can help you manage the notice period effectively and take advantage of new career opportunities.
Our article will discuss:
- The concept of the notice period
- The relationship between the notice period and the length of the employment
- The length of the notice period
- Payroll accounting for the notice period
- Frequently asked questions about the notice period
The concept of resignation
The law distinguishes between the end and the termination of employment.
In the case of termination, the employment ceases by way of a legal declaration of the parties (both parties in case of mutual agreement or one of the parties in case of resignation or dismissal).
The employment may be terminated:
- by mutual agreement: When both the employer and the employee agree on the termination of the employment.
- by way of dismissal or resignation (ordinary termination with notice): When both the employer and the employee are entitled to terminate the employment; the employer must then give reasons for the termination.
- by way of termination with immediate effect (extraordinary termination): When one of the parties terminates the employment with immediate effect due to the other party’s serious breach or other major cause; in such a case, the terminating part – also including the employee if he or she terminates the employment – must provide reasons for the termination.
How is the length of the notice period determined in general?
Regardless of the type of termination of the employment, the length of the notice is as follows, depending on the length of the employment:
The notice period is 30 days.
In case of termination by the employer, the notice period must be extended in accordance with the length of time spent in the employment of the employer, as follows:
a) by five days after three years- 35 days
b) by fifteen days after five years- 45 days
c) by twenty days after eight years- 50 days
d) by twenty-five days after ten years- 55 days
e) by thirty days after fifteen years- 60 days
f) by forty days after eighteen years- 70 days
g) by sixty days after twenty years- 90 days
Type of termination
Termination by the employer (dismissal)
If an employer dismisses an employee, it is required to provide the reasons in writing, in such a way that the ground for the termination can be determined easily from it. The minimum notice period is also 30 days, which may increase depending on the length of time the employee has been with the company.
What is the ‘release from work’ period in the event of dismissal by the employer?
During the notice period, the employee is still required to carry out his or her normal work duties and must be paid for the work done during the notice period. However, if the employer initiated the termination of the employment, the employee must be released from work for at least half of the notice period – this is called the ‘release from work’ period.
The employer may release the employee from work (in the case of termination by the employer) in up to two parts, based on the employee’s preferences.
The employer must pay the employee compensation in the form of absentee pay (basic salary + average supplements, average performance pay) for the release period, unless the employee is not entitled to receive a salary for that period.
The release from the obligation to work gives the employee an opportunity to look for a new job and to attend job interviews during the notice period, when he/she does not have to work.
Severance pay in the event of dismissal by the employer
It is important to note that if the employer initiates the dismissal, the employee is entitled to severance pay – provided that the dismissal is not due to the employee’s conduct in relation to the employment or for health reasons.
The severance pay is calculated on the basis of the absentee pay and the length of time the employee has worked at the given company. No severance pay is due after less than three years’ in the employment.
The amount of severance pay is calculated as follows:
- After at least 3 years of employment, one month’s,
- After at least 5 years of employment, two months’,
- After at least 10 years of employment, three months’,
- After at least 15 years of employment, four months’,
- After at least 20 years of employment, five months’,
- After at least 25 years of employment, six months’ absentee pay is due.
When is the salary to be paid in the event of dismissal?
The employer must pay to the employee his/her salary and other emoluments, as well as issue all statements and certificates required by the relevant rules or provisions of law applicable to the employment, on or before the fifth business day after the last day at work in case of termination of the employment by notice, or on the fifth business day after the termination of the employment otherwise.
In what cases is the employer not allowed to dismiss an employee?
- during pregnancy, if the employer has been informed,
- maternity leave,
- unpaid leave taken for the purpose of caring for a child,
- the period of actual reserve military service,
- in case of female employees only, while undergoing treatment related to a human reproduction procedure, for not more than six months from the commencement of such procedure, if the employer has been informed.
The termination of employment by mutual agreement
If the employment is terminated by mutual agreement, the parties are free to agree on the termination of employment, subject to the relevant provisions of law.
Termination by mutual agreement provides an opportunity for the parties to jointly determine the date of termination of the employment, the amount of severance pay, if any, as well as the dates when the employee is released from work.
Notice period in case of termination by mutual agreement
In case of termination by mutual agreement, a number of other terms can be freely agreed upon, including the amount and method of payment of the severance pay. From a legal point of view, it is difficult to challenge a termination by mutual agreement, as the agreement does not need to state the reasons for the termination, it does not have to specify the notice period, and does not require the application of severance pay.
Employers often try to force employees to terminate the employment by mutual agreement. It is important to emphasise that employees should only agree to termination by mutual agreement if it is genuinely in accordance with their wishes. It is of utmost importance that employers should give employees sufficient time and an opportunity to decide if they wish to terminate their employment by mutual agreement.
Severance pay in case of termination by mutual agreement
Employers are generally motivated towards termination by mutual agreement, as they will have fewer compulsory payments to make to the dismissed employee than in the case of a traditional dismissal. Even if severance pay is agreed upon, this can usually be more favourable in comparison with the case when the employer dismisses the employee.
Ordinary termination by the employee (resignation)
Under the provisions of the Labour Code, if employees resign of their own volition, they are entitled to only 30 days’ notice; even they have worked for the company for many years.
However, there have also been changes to the rules on notice periods in the case of employee resignations. If an employee resigns, the maximum notice period is 30 days, unless a different period is agreed in writing in the employment contract. Under the current provisions, the maximum length of the notice period that can be agreed upon is 6 months.
The Labour Code and the notice period
If you would like to read more about the Labour Code, you can do so by following this link on the specific legal background to the notice period.
Payroll accounting for the notice period
There are many mistakes that can be made in connection with the payroll accounting for the notice period:
It is important to know that, when calculating the notice period on the basis of the length of employment, periods when the employee did not receive any pay for at least 30 days should not be taken into consideration, except for the following periods:
- maternity leave and unpaid leave taken for the purpose of caring for a child,
- the period of actual reserve military service not exceeding three months.
It is important to note that the notice period in the case of a fixed-term employment contract is limited to the expiry of the fixed term, which is a logical requirement as there is no point in extending the notice period beyond the period of the originally planned employment.
It is also important to note that salary already paid cannot be claimed back, except when the employee was released from the performance of work definitely and the circumstances giving rise to ineligibility to salary occurred only after such releasing from work.
Of course, this is only part of the payroll difficulties, as individual situations and employment contracts may raise further issues.
In order to avoid any inconvenience, it is worth hiring a payroll company to do the job for you!
Frequently asked questions about the notice period
What are the types of terminating employment?
- Ordinary termination (dismissal or resignation);
- termination with immediate effect;
- termination by mutual agreement.
How does the notice period depend on the length of time spent in employment with the given company?
The notice period is 30 days for less than 3 years, and increases based on the number of additional years of the employment.
What is the release from work period in the event of dismissal by the employer?
For at least half of the notice period, the employee must be released from work, for which time they are entitled to absentee pay.
In what cases is severance pay due in the event of dismissal by the employer?
Severance pay is due in case of dismissal that is not related to the employee’s conduct or health and the employee has minimum 3 years length of employment.
When is salary due in the event of dismissal?
The employer must pay the salary on the employee’s last day at work or in any case not later than on the fifth working day thereafter.
In what circumstances can an employer not dismiss an employee?
In the event of pregnancy, maternity leave, leave take to care for a child, voluntary military reserve service, and reproductive treatment.
What are the features to start a termination by mutual agreement?
The parties are free to agree on the terms of the termination, including the date of termination and the payment of severance pay, in case the interests of the employer and the employee can be reconciled.
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