What you need to know about The Employment Code of 2019: Severance and Gratuity – Part 3

Gratuity

Gratuity has always been a bit of a sore subject. Some organisations give it, others don’t. Some give 5%, others give 30%. Who decides!?

The act has explicitly stated that an employer shall pay gratuity under the two following circumstances;

  • At the end of a long-term contract period.
  • When an employees contract is terminated where it shall be paid on a prorated basis.

At the rate of not less than 25%.

Severance Pay & Packages

According to the act, severance pay shall be paid in the following instances with the prescribed calculations;

  • Medical Discharge – lump sum of not less than three months basic pay for each completed year of service.
  • Death in Service – two months basic pay for each year served under the contract of employment.
  • Redundancy – a lump sum of two basic pay for each year served under the contract of employment.
  • Expiry of a Fixed Term Contract – twenty five percent of an employee’s basic pay earned during the contract period or the retirement benefits provided by the relevant social security scheme that the employee is a member of.
  • Termination of a Fixed Term Contract – gratuity at the rate of not less than twenty-five percent of the employee’s basic pay earned during the contract period as at the effective date of termination.

Exemptions

The following class of employees are from gratuity and severance pay;

  1. Casual Employees
  2. Temporary Employees
  3. Employees on probation

For more on the Employment Code Act No.3 of 2019, checkout Part 1 & 2, and lookout for more over the next 5 days.

21 thoughts on “What you need to know about The Employment Code of 2019: Severance and Gratuity – Part 3

  1. I once worked in a company on a one year contract but they only gave me gratuity of k 900 , of which my basic pay was k1050 ,anyone to help me ,my phone number 0974850998

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  2. i want to know why employees on probation are not entitled to gratuity? may i know the minimum the law provide for on this? (the law is clear that gratuity is at 25% and there is no exclusion clauses attached)

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  3. Define termination. Supposing I resign on my own accord before end of my long term contract, do I receive gratuity prorated or it is only when the employer terminates my contract?

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  4. There has been debate on when this 25% can actually be calculated should the HR calculate the 25% starting when it was enforced in 2019 or 2020 since the government gave a 1 year probation for the same.

    Liked by 1 person

  5. What happens if I resigned and am permanently employed and in the signed Ts n Cs there is a close about pension to be introduced.

    If I have worked for over a year and this pension scheme has not been introduced…. Do I deserve a certain pay

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    1. Gerald, I equally need guidance on this matter. Suppose one works for 10 years plus on permanent and pensionable basis and resigns out ones accord, what payments is he entitled to apart from leave days pay?

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  6. Thanks Musonda quite an insightful article. How does severance apply with respect to resignation or dismissal?

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