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Severance during layoffs
Severance during layoffs
Regardless of the reason and basis for the termination of the employment contract, the employee must be paid a monetary compensation for all unused basic annual leave days for the entire work period without any conditions or restrictions up until the day of termination. How are additional guarantees regulated when terminating the employment contract based on paragraph b) of Article 70 of the Labor Code (in the case of layoffs or staff reductions)? Human resources and payroll expert Firangiz Samadova answers the question:
When the number of employees or positions is reduced, in addition to the monetary compensation for all unused basic annual leave days, in accordance with Article 77 of the Labor Code, an official notice must be given, and severance pay must be provided. According to paragraph 1 of the mentioned article, before the termination of the employment contract, the employee must be officially notified by the employer in the following periods, depending on the employee's work experience with that employer:
- if the work experience is up to one year – at least two calendar weeks;
- if the work experience is from one to five years – at least four calendar weeks;
- if the work experience is from five to ten years – at least six calendar weeks;
- if the work experience is over ten years – at least nine calendar weeks.
Example 1: An employee has been working as a specialist at “XXX” LLC for 6 months in the current year. However, the total work experience is 8 years, with 2 years of work in this organization (2013-2014), followed by work in other organizations. The employee has resumed working at “XXX” LLC in the last 6 months. How long should the notice period be?
In this case, when the employment contract is terminated due to staff reduction, the employee must be given at least four calendar weeks of official notice. The key point here is that the notice period should be based not only on the ongoing contract's duration but also on the employee's overall work experience in the organization (2 years and 6 months).
According to paragraph 3 of Article 77 of the Labor Code, when an employment contract is terminated based on paragraphs “a” and “b” of Article 70 of the Labor Code, severance pay is calculated according to the employee's total work experience with the employer and is paid as follows:
- If the work experience is up to one year – equal to the average monthly salary;
- If the work experience is from one to five years – at least 1.4 times the average monthly salary;
- If the work experience is from five to ten years – at least 1.7 times the average monthly salary;
- If the work experience is over ten years – at least 2 times the average monthly salary.
According to paragraph 4 of the same article, with the employee's consent, instead of the notification period defined in paragraph 1 of this article, the employer may terminate the employment contract by paying severance equivalent to the following: 0.5 times the average monthly salary for a two-week notice period, 0.9 times for a four-week notice period, 1.4 times for a six-week notice period, and 2 times for a nine-week notice period. In this case, any payment made instead of the notice period is proportionally reduced according to the remaining time of the notice period.
The method for calculating the average monthly salary is outlined in Article 177 of the Labor Code. According to parts 2 and 3 of this article, the average salary is calculated by dividing the total salary earned in the two preceding calendar months by the total number of working days in those months to determine the daily wage, which is then multiplied by the number of working days in the period.
For employees who have worked less than two months, the average monthly salary is calculated as follows:
- The salary earned for the actual working days is divided by the number of those days to determine the daily wage, which is then multiplied by the number of working days.
Example 2: The employee's employment contract will be terminated in November based on paragraph b) of Article 70 of the Labor Code. The employee's total experience in the organization is 2 years and 6 months. The employee’s salary for October is 1,200 AZN, with 23 working days in that month, and 1,200 AZN for September, with 21 working days in that month. The calculation of the average monthly salary will be as follows:
(1,200 + 1,200) / (23 + 21) = 54.55 AZN;
54.55 x number of working days x 1.4
When calculating severance pay, if there are no working days in the current month, several methods can be applied. Let’s explore these methods based on the data in Example 2:
1. By dividing the total salary of the previous two months by 2:
(1,200 + 1,200) / 2 = 1,200 AZN;
1,200 x 1.4 = 1,680 AZN.
2. By assuming the salary of the position as the average monthly salary:
1,200 x 1.4 = 1,680 AZN.
3. By dividing the total salary of the previous two months by the number of working days in those months and multiplying by the number of working days in the current month:
(1,200 + 1,200) / (21 + 23) = 54.55 AZN;
54.55 x 19 = 1,036.45 AZN.
Here, 19 represents the number of working days in November, the month when the termination action is carried out.
1,036.45 x 1.4 = 1,451.03 AZN.
Additionally, it is worth noting that the list of payments considered or excluded from the calculation of the average monthly salary is regulated by the Cabinet of Ministers’ Decision No. 126.
Regardless of the reason and basis for the termination of the employment contract, the employee must be paid a monetary compensation for all unused basic annual leave days for the entire work period without any conditions or restrictions up until the day of termination. How are additional guarantees regulated when terminating the employment contract based on paragraph b) of Article 70 of the Labor Code (in the case of layoffs or staff reductions)? Human resources and payroll expert Firangiz Samadova answers the question:
When the number of employees or positions is reduced, in addition to the monetary compensation for all unused basic annual leave days, in accordance with Article 77 of the Labor Code, an official notice must be given, and severance pay must be provided. According to paragraph 1 of the mentioned article, before the termination of the employment contract, the employee must be officially notified by the employer in the following periods, depending on the employee's work experience with that employer:
- if the work experience is up to one year – at least two calendar weeks;
- if the work experience is from one to five years – at least four calendar weeks;
- if the work experience is from five to ten years – at least six calendar weeks;
- if the work experience is over ten years – at least nine calendar weeks.
Example 1: An employee has been working as a specialist at “XXX” LLC for 6 months in the current year. However, the total work experience is 8 years, with 2 years of work in this organization (2013-2014), followed by work in other organizations. The employee has resumed working at “XXX” LLC in the last 6 months. How long should the notice period be?
In this case, when the employment contract is terminated due to staff reduction, the employee must be given at least four calendar weeks of official notice. The key point here is that the notice period should be based not only on the ongoing contract's duration but also on the employee's overall work experience in the organization (2 years and 6 months).
According to paragraph 3 of Article 77 of the Labor Code, when an employment contract is terminated based on paragraphs “a” and “b” of Article 70 of the Labor Code, severance pay is calculated according to the employee's total work experience with the employer and is paid as follows:
- If the work experience is up to one year – equal to the average monthly salary;
- If the work experience is from one to five years – at least 1.4 times the average monthly salary;
- If the work experience is from five to ten years – at least 1.7 times the average monthly salary;
- If the work experience is over ten years – at least 2 times the average monthly salary.
According to paragraph 4 of the same article, with the employee's consent, instead of the notification period defined in paragraph 1 of this article, the employer may terminate the employment contract by paying severance equivalent to the following: 0.5 times the average monthly salary for a two-week notice period, 0.9 times for a four-week notice period, 1.4 times for a six-week notice period, and 2 times for a nine-week notice period. In this case, any payment made instead of the notice period is proportionally reduced according to the remaining time of the notice period.
The method for calculating the average monthly salary is outlined in Article 177 of the Labor Code. According to parts 2 and 3 of this article, the average salary is calculated by dividing the total salary earned in the two preceding calendar months by the total number of working days in those months to determine the daily wage, which is then multiplied by the number of working days in the period.
For employees who have worked less than two months, the average monthly salary is calculated as follows:
- The salary earned for the actual working days is divided by the number of those days to determine the daily wage, which is then multiplied by the number of working days.
Example 2: The employee's employment contract will be terminated in November based on paragraph b) of Article 70 of the Labor Code. The employee's total experience in the organization is 2 years and 6 months. The employee’s salary for October is 1,200 AZN, with 23 working days in that month, and 1,200 AZN for September, with 21 working days in that month. The calculation of the average monthly salary will be as follows:
(1,200 + 1,200) / (23 + 21) = 54.55 AZN;
54.55 x number of working days x 1.4
When calculating severance pay, if there are no working days in the current month, several methods can be applied. Let’s explore these methods based on the data in Example 2:
1. By dividing the total salary of the previous two months by 2:
(1,200 + 1,200) / 2 = 1,200 AZN;
1,200 x 1.4 = 1,680 AZN.
2. By assuming the salary of the position as the average monthly salary:
1,200 x 1.4 = 1,680 AZN.
3. By dividing the total salary of the previous two months by the number of working days in those months and multiplying by the number of working days in the current month:
(1,200 + 1,200) / (21 + 23) = 54.55 AZN;
54.55 x 19 = 1,036.45 AZN.
Here, 19 represents the number of working days in November, the month when the termination action is carried out.
1,036.45 x 1.4 = 1,451.03 AZN.
Additionally, it is worth noting that the list of payments considered or excluded from the calculation of the average monthly salary is regulated by the Cabinet of Ministers’ Decision No. 126.