One of the most common misconceptions is the belief that severance pay is only due when the company carries out group layoffs. That's not true.
— The right to severance pay results from the Act on special rules for terminating employment relationships with employees for reasons not attributable to the employees, explains Angelika Czarnecka, legal counsel managing the labor law practice at J. Dauman Legal. — Although it is commonly called the Act on collective redundancies, its provisions also apply to certain cases of individual redundancies.
A dismissed employee is entitled to severance pay when:
- the employer employs at least 20 employees,
- the contract is terminated for reasons not attributable to the employee, i.e. those that are not related to his fault or behavior.
So in practice, it's about situations like: liquidation of a job position, restructuring, reorganization of the company, bankruptcy of the employer or other organizational or economic changes that are not due to the employee's behavior or fault.
It is in such individual cases that regulations are most often overlooked.
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How the amount of severance pay is determined
The amount of severance pay depends on the length of service with a given employer:
- one month's remuneration – if the employee was employed for less than 2 years,
- two months' salary – if he was employed for 2 to 8 years,
- three months' salary – if he was employed for more than 8 years.
The Act also sets an upper limit: severance pay cannot exceed 15 times the minimum wage.
It is also important that when determining the amount of severance pay, seniority with a specific employer is taken into accountnot the employee's overall length of service. Sometimes, however, the company's internal regulations provide for more favorable solutions, for example, including periods of employment in other companies of the same capital group.
When the employer must pay severance pay
Severance pay becomes due on the date of termination of the employment relationship. As a rule, it should therefore be paid at this point at the latest. It is unacceptable to divide it into installments or postpone the payment until later just because the employer agreed with the employee.
If the employer is late with the payment, the employee may also claim interest for the delay.
Severance pay upon termination of the contract by mutual consent of the parties
The mere fact that the contract is terminated by mutual consent of the parties does not exclude the right to severance pay. What is important is the reason for terminating employment.
If the parties' agreement is concluded because the job position is being eliminated or the company is undergoing reorganizationand the reason does not concern the employee, severance pay may still be due.
It is in the employer's interest to expressly stipulate in the agreement that the contract is not terminated for the reasons specified in this Act, if this is the intention of the parties. The lack of such a provision may lead to court disputes regarding the right to severance pay.
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An employee cannot waive severance pay
The right to severance pay results from the law, so the employee cannot effectively waive it. In practice, this means that even if he signs a document declaring he will resign from the severance pay, such a decision may be considered invalid.
It is worth adding that the employer may offer a bonus or compensation for agreeing to a specific method of terminating the contract, but this does not replace statutory severance pay. Any attempt to circumvent the provisions of the Act in this respect is ineffective.
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Notice changing working conditions as a way to circumvent severance pay
As Angelika Czarnecka explains, a notice of termination changing working and pay conditions does not in itself automatically mean the right to severance pay, but in practice there are cases in which this instrument is used in a way that leads to the circumvention of the regulations, especially when the proposed new conditions are grossly unfavorable and are in fact intended to induce the employee to refuse to accept them.
This may include, for example, a drastic reduction in salary, an offer of a position that does not match the qualifications, or a transfer of the workplace so far away that continuing employment becomes unrealistic.
In such cases, the court may find that the employer's real goal was not to propose continuation of employment under new terms, but to terminate the employment relationship under the guise of changing the terms of employment.
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Is an employee entitled to severance pay when dismissed due to illness?
Not every reason that is not the employee's fault entitles him to severance pay. Long-term illness, although not the employee's fault, does not generally constitute grounds for awarding it.
— If the employer terminates the contract after the expiry of the protective periods related to incapacity for work, this is generally not a situation covered by the right to severance pay. This right applies only in the event of termination of the employment relationship for reasons not attributable to the employee, of an organizational, economic or technological nature on the part of the employer. The disease, although not the employee's fault, is a circumstance affecting the employee and not the employer's fault, emphasizes Attorney Czarnecka.
Severance pay and other employee claims
Importantly, receiving severance pay does not exclude the possibility of appealing against the termination notice to a labor court. At the same time, the employee may pursue claims for unlawful termination of the contract, including compensation or reinstatement.
However, it should be remembered that if the court finally reinstates the employee to work, the previously paid severance pay may be considered an undue benefit and may be refunded.
The most important issues to check when terminating a contract
Due to the fact that severance pay is not a benefit reserved for large group layoffs, it is worth checking:
- how many employees the employer employs,
- what was the actual reason for terminating the contract,
- whether this reason does not really concern the employee,
- whether the employer paid the severance pay due,
- whether the content of the parties' notice or agreement was formulated in a way that raises doubts.
Both employees and employers are often unaware that they may be entitled to statutory severance pay when dismissed for reasons not attributable to the employee. Meanwhile, the 20-employee threshold doesn't just apply to large corporations – it also covers many medium-sized and smaller companies. The biggest mistake is to ignore the provisions of the Act and assume that since there are no classic group layoffs, the issue of severance pay does not exist. The employer should correctly determine the reason for terminating the contract, describe it properly and assess whether an obligation to pay severance pay arises in a given case.
