Exit Management- HR Guide
Introduction
This guide covers a range of information which includes:
- Redundancy
- Redundancy payments
- Retirement
- Termination of employment
Redundancy
A fair redundancy process should be followed where a genuine redundancy situation arises. Redundancy situations may be due to a reduction of the work for which the employee is engaged, where company premises are being relocated or where, perhaps, a serious financial situation is arising dictating early cuts in labor costs.
Redundancy must not be used simply as a vehicle to dismiss an employee who is proving unsatisfactory.
Wherever possible an employer should consider alternatives to redundancy such as wage-target working where non-performing employees’ wages are tied to their productivity or performance target. This of course has to be discussed with affected employees first and agreed to before activating it.
A full, formal and proper consultancy process should always be provided. Ideally this should be supported by documents to show:
- How the redundancy situation has arisen
- Outline clearly the criteria being used to select which employees are to be made redundant
- Consideration that has been given to finding alternative employment within the company or associated companies/group
Employers should fully consult with the affected employees prior to making any selection.
Employees who are put at risk of redundancy must be given reasons why they were selected and the opportunity to challenge that selection.
Dismissals of employees should be undertaken using a proper redundancy process that complies with the Nigeria Labor Law and attendant acts.
The employees being dismissed should be made aware of the various elements of redundancy pay (if any) they will receive.
Any short cuts in the pre-dismissal process can be potentially costly and could result in a successful claim at an Industrial Court, especially if any of the following apply:
- Dismissal is for a spurious redundancy reason
- Selection was based on unsound criteria
- There was not a consultancy process
- No alternative employment possibilities were considered
Redundancy payments
There is no general statutory severance pay or redundancy pay, although there is provision for the Minister of Labor to enact regulations providing for severance pay to redundant workers (pursuant to sec. 20(2) of the LA). As of 2010, no such regulations have been adopted. Nevertheless, to show its good faith and best endeavor, the employer may at its sole discretion, meet with representative of the employees to agree on other customary heads of claims and allowances not mentioned in the contracts of employment documents. The termination notice must clearly list the severance benefits of the individual employee. Since each contract of employment constitutes a distinct course of action, the employer must give each employee his termination notice.
Severance pay is often regulated by the contract of employment and sectorial (branch) collective agreements. Severance pay is usually calculated depending on the length of service and the last salary of the worker.
Retirement
In many instances employees wanting to retire will simply resign, and employers wanting employees to retire will either need objective justification or look at the reasons as to why they would like them to retire and address those reasons through a formal procedure, such as performance and capability.
When an employee resigns, it is important for the employee to understand the arrangements for their departure, including how their resignation will be dealt with, who they handover to along with details of any exit interview.
Termination of employment
A Contract of Employment will commonly come to an end following
- Termination by the Employer (Dismissal)
- Termination by the Employee (Resignation)
- By mutual agreement or contractual provision between the Employer and the Employee
There are also a number of less common situations where the contract ends automatically including where performance of the contract is impossible for example due to serious illness (Frustration of contract).
Notice of termination of employment must be given by either employee or employer or salary in lieu of such notice. The Labour Act provides the following as minimum notice periods for the termination of an employment contract for workers:
- Where the employee has been employed for a period of 3 months or less, either the employee or employer may terminate the contract with a minimum of 1-day notice
- Where the employee has been employed for a period of 3 months but less than 2 years, either the employee or employer may terminate the contract with a minimum of 1-week notice.
- Where the employee has been employed for a period of 2 years but less than 5 years, either party may terminate the contract with a minimum of a 2-week notice.
- Where the employee has been employed for a period of 5 years or more, either party may terminate the contract with a minimum of 1-month notice.
When giving notice of termination of employment contract where the notice is 1 week or more, the notice must be in writing.
Parties may however agree to longer periods in their contract of employment. With respect to non-workers, the applicable notice period is determined by the terms of their respective contracts of employment.
Dismissals
Dismissal can be with or without (summary) notice. If it is summary dismissal, it must be for one of the following principal reasons to be fair:
- The CONDUCT of the employee
- The CAPABILITY of the employee
- ILLEGALITY
- SOME OTHER SUBSTANTIAL REASON such as to justify the dismissal
All dismissals must satisfy the test within the legislation which means that an employer must ensure that both the main reason for the dismissal and the procedural methods used to implement the dismissal will need to be demonstrably fair before an Industrial Court claim can be defended.
Resignation
All resignations should ideally be received by employers in written form as difficulties may arise where verbal notification only exists. This is particularly true where resignations are given in the heat of the moment following disagreements that may have arisen. It is always the case that the employer is expected take those steps necessary to ensure that they are as certain as they can be that the resignation is unambiguous on the part of the employee.
The question of whether notice will be worked should also be confirmed in written form to avoid unnecessary confusion at a later date. Verbal agreements only are likely to go against an employer in the absence of an unambiguous agreement in relation to notice. Attention should also be given to the contractual provisions that the employer has in place in relation to pay in lieu of notice and other associated issues that may apply on resignation or indeed dismissal.
Mutual Agreements
Mutual agreements to terminate a contract are not as commonplace as other methods but still meet the needs of the parties to a contract. There is therefore no dismissal in these circumstances and employees will not be entitled to bring claims for unfair or wrongful dismissal. Typical examples will include voluntary early retirement arrangements and financial severance packages.
Many such situations result in the production of a legally binding agreement, known as a Settlement Agreement.
Considerations when an employee leaves the business
When an employee leaves a business either through their own choice or that of their employer, it is important to consider many aspects that are often forgotten including conducting an exit interview, cancelling credit cards, deactivating passwords, and managing conversations regarding ongoing confidentiality.
When an employee leaves the business, an employer might mistakenly think that their obligations towards a former employee have ceased. In many instances they may be right in their thinking; however, work related reference requests will almost certainly be received.
Knowing how to approach issues that may present themselves after an employee has left your employment is important as your legal liability will not end just because the employment relationship has.