Legal nature and purpose of benefits upon termination of an employment contract
Upon termination of the employment relationship, the regulations in the Labor Code impute to the parties to the legal relationship (most often the employer) the making of various payments. These are the so-called benefits upon termination of an employment contract, the purpose of which is to help settle the property relations between the parties as a result of the termination of the employment relationship between them. The grounds on which benefits are due upon termination of the employment contract, as well as their type and amount, are determined imperatively at the legal level.
Compensation upon termination of an employment contract for non-observed notice under Art. 220 of the Labor Code
According to Art. 220, para. 1 of the Civil Code, the party that has the right to terminate the employment relationship with notice (the employer – in accordance with Article 326 of the Civil Code, and the employee – in accordance with Article 328 of the Civil Code), may do so even before the notice period expires , in which he owes the other party compensation upon termination of the employment contract in the amount of the gross remuneration of the worker or employee for the missed period. The gross remuneration for determining the benefit is the gross remuneration received by the worker or employee for the month preceding the month in which the legal relationship was terminated, or the last monthly gross remuneration received by the worker or employee, unless otherwise provided. Art. 220, para. 2 of the Civil Code, on the other hand, stipulates that the party that has been notified of the termination of the employment relationship may terminate it before the notice period expires. In such a scenario, it will also owe the other party compensation upon termination of the employment contract in the amount of the worker’s or employee’s gross remuneration for the non-observed notice period. From these provisions, it could be concluded that compensation upon termination of an employment contract for non-observed notice could be owed by both the employer and the employee, depending on which party to the legal relationship makes and respectively fails to comply with the period specified in the notice. Most often, in practice, employers choose not to comply with the notice period when they have found a more suitable worker, and employees – a job corresponding to their requirements. The term of the notice begins to run from the day following its receipt, and its duration is determined depending on the type of employment contract concluded. In the case of open-ended employment contracts, it is 30 days, unless the parties have agreed on a longer period, but it cannot exceed 3 months. The notice period for termination of fixed-term employment contracts is 3 months, but no longer than the remainder of the contract term. It is important to note that the compensation upon termination of an employment contract under Art. 220 of the CT is subject to taxation.
Compensation upon termination of an employment contract without notice under Art. 221 of the Labor Code
The following scenario, in which compensation is paid upon termination of an employment contract, is regulated in Art. 221 of the Criminal Code. It is envisaged that the employer owes compensation upon termination of the employment contract by the employee in several expressly listed hypotheses. First of all – when the employer delays payment of remuneration or compensation. Next – when he changes the place or nature of the work or the agreed remuneration, except in cases where he has the right to make such changes, as well as when he fails to fulfill other obligations stipulated in the employment contract, the collective labor agreement or established by a regulatory act. The third hypothesis is present when, as a result of a change in the organization and activity of the employer in accordance with Art. 123, para. 1 and Art. 123a, para. 1 of the CT significantly worsens the working conditions at the new employer. The employer owes the worker or employee who terminated the employment contract without notice compensation for the period of notice in the amount of the gross labor remuneration, when the employment relationship is open-ended, and in the amount of actual damages – when the terminated employment contract is fixed-term. Such compensation upon termination of the employment contract is also owed by the worker or employee when he was dismissed for reasons that lie in his culpable behavior, namely – in case of disciplinary dismissal (Article 221, Paragraph 2 of the Civil Code) and in case of dismissal due to a conviction for a crime, which also constitutes a violation of labor obligations (art. 221, para. 3 of the Criminal Code).
Benefits upon termination of an employment contract on other grounds under Art. 222 of the CT – to provide the worker with unemployment benefits and incentive payments
The next group of benefits upon termination of an employment contract, which the Labor Code provides for, are regulated in the provision of Art. 222 of the Criminal Code. In para. 1 of the provision exhaustively lists no-fault grounds for dismissal of the employee, namely – closure of the enterprise or part of it, layoff in the state, reduction of the volume of work, suspension of work for more than 15 working days, refusal of the worker or employee to follow the enterprise or its division in which he works, when it moves to another settlement or locality, and when the position occupied by the worker or employee must be vacated for the reinstatement of an illegally dismissed worker or employee who previously held the same position. The compensation upon termination of the employment contract in this case is in the amount of the gross remuneration of the worker for the time during which he was unemployed, but for no more than 1 month. If, in the meantime, the employee has entered into another employment relationship for which he receives a lower remuneration, he is entitled to the difference for the same period. In the event of termination of the employment relationship due to illness, the employee has the right to compensation from the employer in the amount of his gross remuneration for a period of 2 months with the cumulative presence of two prerequisites – if he has at least 5 years of work experience and in the last 5 years of work internship did not receive compensation on the same basis.
Also of interest are incentive payments for workers or employees, regulated in Art. 222, para. 3 and 4 of CT. They are benefits upon the termination of an employment contract, which the employer pays in the presence of prerequisites expressly provided for in the law and as a result of the employee’s continuous work in his enterprise. The employee is entitled to such compensation upon termination of the employment contract, after having acquired the right to a pension for length of service and age, regardless of the reason for the termination. The amount of compensation is equal to the employee’s gross remuneration for a period of 2 months, and if he has acquired 10 years of work experience with the same employer or in the same group of enterprises in the last 20 years – to his gross remuneration for a period of 6 months. Such a right to compensation upon termination of the employment contract also arises, when the person meets the conditions for granting a pension for insurance service and age in a reduced amount under Art. 68a of the Social Security Code. This type of compensation upon termination of an employment contract can be paid only once.
Compensation upon termination of an employment contract for unused paid annual leave under Art. 224 of the Criminal Code
The right to compensation upon termination of an employment contract for unused paid annual leave arises regardless of the reason on which the legal relationship was terminated. According to Art. 224, para. 1 of the Labor Code in such a scenario, the employee has the right to monetary compensation for the unused paid annual leave on the date of termination in proportion to the time that is recognized as work experience. The leave must not have expired by statute of limitations. The basis for calculating the compensation is the average daily gross remuneration received by the worker or employee for the preceding calendar month, during which at least 10 working days were worked. This severance pay is also taxable under the Personal Income Tax Act, and no social and health insurance contributions are due on it.