Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?

Employment & Labour Law (3rd edition)

Argentina Small Flag Argentina

If employer does not provide the employee with adequate notice, the employer must pay in lieu of such omitted notice. This will be an amount based on the length of services. For less than 3 months one-half of the monthly salary, between 3 month and 5 year one monthly salary and any time after 5 year two monthly salaries. The salary to be used to calculate this payment is the regular monthly salary, omitting any other non-monthly payment. As a matter of practice, employers do not provide prior notice and make a payment in lieu of notice.

China Small Flag China

The employer may pay one-month’s salary in lieu of notice to the employee when it has the right to unilaterally terminate without fault (see question 1).

Ecuador Small Flag Ecuador

There is no minimum notice period.

France Small Flag France

The employer may decide to put the dismissed employee on garden leave, with maintained pay and benefits in kind (e.g., company car), until the end of the notice period.

Germany Small Flag Germany

Generally, that is not possible. The employee’s respective notice period needs to be considered in any case of an ordinary dismissal. However, the notice period may be shortened or waived completely by mutual agreement.

Chile Small Flag Chile

Yes. In case of business needs and termination at will the minimum notice period of 30 days may be waived by paying to the worker a severance payment equivalent to one monthly remuneration capped in €3.274,97/USD3,731 approx.

Indonesia Small Flag Indonesia

Yes, this is possible. Kindly be advised that in a mutual termination of employment, an employer would offer the employee a termination payment for the employee to agree to terminate the employment relationship. As mentioned above, termination by way of serving a notice period would be considered a unilateral termination of employment and therefore restricted. If the employee does not agree to the termination of employment, then the employee will remain with the employer and no termination of employment will occur.

Italy Small Flag Italy

The employer, at its own discretion, is entitled to exempt employees from working over the notice period, conditional upon payment to them of the relevant indemnity-in-lieu. This has to be calculated taking into account - in addition to the base annual gross salary paid to the relevant employee - also the additional monthly salary/salaries provided for by the applicable national collective bargaining agreement, the variable compensations paid over the last 3 years as well as the value of those fringe benefits granted to the employee.

Malaysia Small Flag Malaysia

Yes, salary for the requisite period of notice can be paid in lieu of notice.

However, it must nonetheless be borne in mind that Section 20(1) of the Industrial Relations Act 1967 states that the termination of employment may only be for “just cause and excuse”. Therefore, employers are required to justify terminating employment.

Norway Small Flag Norway

Norwegian statutory law does not state any rules regarding the payment of compensation as a basis for terminating the employment contract. However, the employer may enter into an agreement with an employee according to which the employment contract is severed in return for the payment of compensation to the employee. The employee will always be entitled to payment for the contractual termination period. This is not considered to be a severance payment.

The agreement can only be entered into in connection with a possible termination of employment. It cannot be agreed in advance in the employment contract that the employee is obliged to waive his/her rights under the WEA. However, this does not apply to the general manager position. A general manager may relinquish his/her rights against severance in the employment contract.

Philippines Small Flag Philippines

Service of the required written notice/s is a requirement of procedural due process under Philippine Law. Failure to comply will not, however, automatically invalidate the termination, as the employer will merely be liable to pay nominal damages.

United States Small Flag United States

Due to the at-will nature of most employment relationships, either the employer or the employee may terminate the employment relationship at any time, for any reason or no reason at all, without providing notice, unless otherwise agreed. Although the WARN Act requires a 60 day notice period, nothing under the Act specifically requires employers to continue to employ affected employees during the 60 day notice period. Consequently, employers may provide “payment in lieu” of providing WARN notice provided that they properly value the 60 day period, including all compensation and benefits. Failure to properly compensate affected employees under WARN may result in litigation, attorney’s fees, and civil penalties.

Where the parties to an employment agreement have agreed to a notice period, they may also contractually agree to payment of money to a worker in lieu of a notice of termination.

Brazil Small Flag Brazil

Mattos: Yes. The employer may ask the employee not to attend the notice period; in return, the employer has to compensate the employee for the days of the notice period.

Thailand Small Flag Thailand

Yes, in the case where an employer would like the employment to be terminated with immediate effect, the employer is entitled to make payment in lieu of advance notice.

Turkey Small Flag Turkey

The employer is entitled to make a payment in lieu of notice which changes between 2 to 8 weeks’ gross salary, depending on the employee’s length of service (See Question 4). There is no cap applicable to it and the actual salary of the employee, as well as the additional financial benefits (e.g. bonus) are considered.

Switzerland Small Flag Switzerland

The parties can agree in a termination agreement that the notice period be shortened in exchange for compensation. Such agreements must include equivalent 'reciprocal concessions', meaning that the employer must grant the employee what they are legally and contractually entitled to until the end of the notice period, plus compensation for any waived rights (see question 16).

In other cases, the notice period must be observed unless the employer terminates the employment relationship without notice for 'just cause'. 'Just cause' is defined as any circumstance under which the continuation of the employment relationship cannot, in good faith, be expected from the terminating party. Swiss courts determine freely whether a dismissal was made for 'just cause' and usually take a restrictive approach in admitting such cases, for example, by requesting that a preliminary warning be issued prior to the dismissal. In any event, an employee being prevented from working through no fault of their own may, under no circumstances, be considered 'just cause'. In addition, once the 'just cause' has been identified, the employer must terminate the employment agreement (or issue a preliminary warning) within two to three business days.

A termination for 'just cause' does not imply the payment of monies to avoid observing the notice period. However, if the employer terminates the employment agreement without observing the notice period and in the absence of 'just cause', they must compensate the employee (see question 8).

Sweden Small Flag Sweden

The provisions in the EPA regarding termination and notice periods are mandatory. However, the employer and the employee may agree to terminate the employment by mutual agreement where the employee normally agrees to end his employment against compensation.

New Zealand Small Flag New Zealand

An employment agreement may allow an employer to pay an amount instead of notice: this is commonly referred to as paying in lieu of notice.

In these circumstances an employer exercising that right will terminate employment prior to the expiry of the notice period by making such payment, i.e. it is in lieu or ‘instead’ of actual notice. An employer is only able to pay in lieu if the employment agreement provides for it, or if the employer and employee agree.

If there is no contractual ability to make a payment in lieu of notice, and an employer gives less than the required amount of notice, then it has not given notice at all: notice has not been legally effected and can only be remedied by giving new notice for the correct period.

Where the employer is wishing to end the employment relationship, any ability to terminate on notice or pay instead of notice does not absolve an employer of the requirement to provide reasons and justify a termination (see question 1).

Luxembourg Small Flag Luxembourg

Payment in lieu is not legal in Luxembourg: employers must (terminate the contract and) pay out the wages (and the social security premiums and taxes) every month, even if the employee is on garden leave.

An employer may, however, conclude a ‘termination by mutual consent’ with the employee concerned and therefore mutually agree upon a payment and an (earlier) end date to the employment relationship.

Romania Small Flag Romania

Payment in lieu of notice is not possible. In fact, while this used to be limitedly permitted under certain sector-level collective agreements, a ruling of the Romanian High Court of Cassation and Justice (dating back to February 2015) has held that payment in lieu of notice is not permitted as it essentially breaches an employee's right to receive notice (which is a fundamental legal right).
On this basis, if the employee is legally entitled to notice, employment cannot terminate sooner than actual lapse of the respective notice period.

Peru Small Flag Peru

Yes. It is possible but only in a direct negotiation with the employee when terminating its employment agreement or within a collective voluntary disengagement plan. Regarding the latter, the employer may offer economic incentives to their workers in order to terminate the employment relationship, not requiring for said negotiation a prior notice period.

Japan Small Flag Japan

Yes, the employer may make a payment equivalent of 30 days’ salary in lieu of notice. The employer may also shorten the notice period by making a payment equivalent to salary for the days reduced from such notice period (Article 20, paragraph 2 of the Labour Standards Act).

The Netherlands Small Flag The Netherlands

It is not possible to convert the obligation to observe the notice period into a one-off payment.
However, the party terminating the employment in breach of the notice period will have to pay compensation, which is fixed to the salary that would have been paid when the notice
period would have been duly observed.

Austria Small Flag Austria

Yes; Austrian law allows pay in lieu of notice, but this will only be valid if agreed upon by both parties.

Mexico Small Flag Mexico

Given that there is no need to provide prior notice, it is not common in Mexico to offer additional compensation.

United Kingdom Small Flag United Kingdom

Yes, provided the employer has included a right to make such a payment, which is known as a payment in lieu of notice, in the contract of employment. If no right is included in the contract of employment, the termination of employment will still be valid but it will be in breach of the contract terms. In such circumstances the notice monies are treated as compensation for the contractual breach. For tax purposes, the proportion of the compensation payment that reflects basic pay for any part of the notice period not served, must be treated as earnings and subject to tax and NICs.

Many employers prefer to rely on an express right to make a payment in lieu of notice, because if the contract is terminated in breach, the employer may not be able to enforce other provisions that would otherwise have survived its termination. For example, post-termination covenants restricting an individual’s involvement with certain clients and types of work, and obligations to protect confidential information.

Armenia Small Flag Armenia

Yes, an Employer may provide pay in lieu of notice in size of average salary of the employee for notification period days.

South Korea Small Flag South Korea

Please refer to Question 4.

Croatia Small Flag Croatia

Croatian law does not recognize the possibility of payment of monies to a worker to end the employment relationship instead of giving notice.

The existence and expiration of a notice period for the termination of an employment relationship is an ex lege requirement for the lawfulness of termination in all cases with the exception of extraordinary notice of termination.

Updated: April 12, 2019