Termination of employment
Ending employment is a sequence of duties in a fixed order: a preliminary check, a hearing, a decision, notice, a dismissal letter, release documents and a final settlement. This guide sets out what is required at each stage, what the final settlement contains, and in which circumstances a resignation carries an entitlement to severance pay.
The order of steps
Most labour claims are born not of a wrong decision but of a wrong order. The required sequence is this:
- A preliminary check for any provision restricting dismissal.
- A written summons to a hearing, with reasons and dates, a reasonable time in advance.
- The hearing itself, before the decision has crystallised, recorded in a protocol.
- Time to consider, and then the decision.
- Notice, of a length following from seniority and the basis of pay.
- A dismissal letter and the release documents.
- A final settlement and payment of every component.
Reversing any two of these, for instance a decision that preceded the hearing or a dismissal letter sent before consideration was complete, turns a process sound in substance into one defective in form. The full account of the hearing is on our page on the pre-termination hearing.
The check that comes first
Before summoning an employee to a hearing it must be confirmed that there is no bar to dismissal. Statutory provisions make dismissal conditional on a permit from the Ministry of Labour, and others prohibit it outright in defined circumstances, for example during maternity leave. Further provisions may arise from a collective agreement or the employment agreement: a bar on dismissal for a defined period, or a duty to consult the works council.
This check is not a formality. A dismissal carried out without the required permit is not merely defective in process; it may be void on its merits, and may also expose the employer to administrative enforcement.
There are three sources to check, and they are checked cumulatively: statute, the collective agreement or expansion order applying to the sector or workplace, and the individual agreement. Each may only improve on the one before it for the employee, and never reduce it.
Notice period
The duty to give notice falls on both sides: on an employer seeking to dismiss and on an employee seeking to resign. Its length is set by seniority at the workplace and by the basis on which the wage is paid. A salaried employee is one paid monthly or on a longer basis; an employee paid by the day or by the hour falls into the second category.
| Seniority | Salaried employee | Employee paid daily or hourly |
|---|---|---|
| First year | Six days for each of the first six months, plus two and a half days for each additional month | One day for each month of work |
| Second year | One month, on completing a year | 14 days, plus a day for each two further months of work |
| Third year | One month | 21 days, plus a day for each two further months of work |
| From the fourth year | One month | One month |
In computing seniority for this purpose, periods of unpaid absence for pregnancy and childbirth, fertility treatment or in vitro fertilisation are included. The employer may dispense with the employee working during the notice period and end the employment immediately, provided the full wage for it is paid, and in that case the employee is also entitled to redemption of unused leave. The employee may not be compelled to use accrued leave during that period, whether on dismissal or on resignation.
The dismissal letter and accompanying documents
Three documents are handed over on termination, each with a separate practical function:
- A dismissal letter. Required in order to claim unemployment benefit from the National Insurance Institute. Delay in providing it delays the employee entitlement in practice.
- Form 161. The employer notice of retirement, used to compute tax on retirement grants and to elect a continuity route.
- A release letter. The notice to the managing company that allows the employee to take ownership of the sums accrued in the fund.
All three are handed over on any termination of employment, whether by dismissal or by resignation. Failure to provide them, or providing them in part, is among the most common grounds of claim, and among the easiest to prove, since the dispute is factual rather than legal.
The final settlement
A final settlement is not one payment but a set of components, each resting on a different normative basis:
- Wages to the last day of employment, including any unpaid overtime premium.
- Redemption of unused annual leave. There is no corresponding statutory right to redeem unused sick days, though one may arise under an employment agreement or collective agreement.
- Convalescence pay pro rata for the period not yet paid.
- Severance pay for an employee who has completed one continuous year, at one month wage per year of employment, based on the last wage, with a proportionate part for part of a year after the first.
- Payment in lieu of notice, where the employer dispensed with the work itself.
Where an employee is dismissed shortly before completing the first year, the dismissal is treated as intended to avoid severance pay, and unless the contrary is shown the employee is entitled to it. This is one of the rules most often forgotten in short engagements.
Resignation carrying severance
As a rule severance pay is due to an employee who has been dismissed. But the law recognises circumstances in which a resignation is treated as a dismissal, and the employee is entitled to severance even though they initiated the termination. An employee resigning is not required to give reasons, but one seeking to rely on such a ground must proceed in a particular way.
The most prominent ground is a material worsening of the terms of employment. Here a prior duty falls on the employee: to give advance warning of the intention to resign because of the worsening, and to give the employer a proper opportunity to put matters right so far as possible. An employee who resigns without such warning may find it difficult to establish the connection between the worsening and the resignation, and the entitlement to severance may be affected.
From the employer point of view that warning is an opportunity rather than a threat: once it is received, correcting the terms within a reasonable time severs the ground for resignation. The full account is on our page on worsening workplace conditions.
Where the exposure arises
Analysis of termination files points to a small number of places where most of the exposure is created, all of them manageable in advance:
- Timing. A decision taken before the hearing, or a dismissal letter issued before consideration was complete.
- Generalised reasons. Performance allegations without events and dates cannot be answered, and so do not withstand scrutiny.
- Incomplete documentation. No protocol, or a protocol that does not reflect what was said.
- A partial final settlement. A component omitted, for instance leave redemption or pro rata convalescence pay, brings with it not only the payment but the cost of the proceedings.
- Documents not handed over. A dismissal letter or release letter that is delayed.
Each of these components carries its own limitation period, so the timing of taking advice also affects the room for manoeuvre, on both sides.
In summary
Termination of employment is examined after the event as a sequence rather than as an event. The preliminary check, the hearing, the time to consider, notice, the documents and the final settlement are links each of which can be examined separately, and a defect in one is not cured by the soundness of the others.
The complexity lies not in the rules themselves but in their intersection: statute, expansion order, collective agreement and individual agreement apply at the same time, each component carries its own limitation period, and the burden of proof shifts between the parties according to the type of allegation. Handling a termination properly, whether building it in advance or examining it after the fact, calls for professional legal representation by a lawyer who specialises in labour law.
If you are about to end an employment and want to be sure the process is properly built, or you have received a letter of demand following a dismissal already carried out, contact us and we will go through the file and the options open to you.
Most asked
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All Labour Law Department pages
Before you end an employment
Send us the employment agreement, the recent payslips and the draft summons. That is enough to say whether the process is properly built, what is missing from it, and the order of magnitude of the final settlement.