According Act No. 311/2003 Coll. of the Labour Code, the employer is obliged to grant severance pay after giving notice to an employee, or if the employment relationship is ending by mutual agreement, for the following reasons:
- if the company or business is dissolved or relocated and the employee does not agree with the change;
- if an employee becomes redundant due to change in his or her duties, technical equipment or the reduction in the number of employees is aimed at securing work efficiency, or due to other organisational changes having an impact on employment;
- if the employee has lost his or her ability to perform the work due to changes in health conditions as a result of an occupational disease or the threat of such a disease.
The minimum amount of severance pay depends on the employee's number of years in service for the employer.
When employment is terminated by notice, the minimum amount of severance pay is equal to one to four times the employee's average monthly earnings, according to the number of years in service (at least from 2 to 20 years). For instance, employees that have been working for the employer for at least 2 years but less than 5 years are entitled to one monthly earning, employees that have been working from 5 to less than 10 years are entitled to two monthly earnings, etc. Employees who have been working for the employer for less than 2 years are not entitled to severance pay.
If employment is terminated by agreement (the employee leaves the company before the statutory notice period), the severance pay is between one and five monthly average earnings (employees in service less than two years are entitled to one monthly earning and other employees specified above from two to five monthly earnings).
A severance allowance applies also when an employer terminates an employee's employment contract (by notice or by agreement) for the reason that the employee cannot longer perform his or her job as a result of an occupational accident, occupational disease or the risk of such a disease. The allowance equals to at least 10 times the employee's average monthly earnings.
The minimum amount of severance pay set by the Labour Code can be increased through collective bargaining (Act No. 2/1991 Coll.) with trade unions in collective agreements.
According to amendments to the Labour Code effective from 1 January 2013 (Act No. 361/2012), also employees who continue working for the employer during the notice period are entitled to redundancy pay.
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