Dismissal indemnity is payable unless the dismissal is due to gross misconduct or intentional misconduct. The amount payable is mainly set by the collective bargaining agreement but must not be less than 1 / 4 of the monthly salary per year of service for the first ten years of service, plus 1 / 3 of the monthly salary for each year of service after ten years. Indemnity is also payable for unused accrued holiday entitlement and for the notice period if the employer chooses to release the employee from performing it.
The employment contract may provide for the employer to make a payment in lieu of notice, for example, equal to the salary that the employee would have earned during the notice period. If this is not provided for in the contract, the parties can agree for such a payment to be made, for example, as ‘damages’ for breach of contract.
If an employee with two years’ continuous service has been made redundant, they will be entitled to a statutory redundancy payment. The amount is calculated according to a statutory formula based on the employee’s age, length of service and weekly pay (capped at GBP 538 as at April 2020), up to a maximum of GBP 16,140 (as at April 2020). The employment contract may provide for an enhanced redundancy payment.
If the employee has been unfairly dismissed, and brings a successful claim in an employment tribunal they may be able to claim a ‘basic award’ calculated according to the same formula as the statutory redundancy payment (but employees cannot usually recover both a statutory redundancy payment and a basic award), and a ‘compensatory award’ which is capped at the lower of one year’s salary and GBP 88,519(as at April 2020). If an order for reinstatement or re-engagement is made there is scope for this cap to be lifted.
Employees who argue that they were dismissed for making a protected disclosure (whistleblowing) are not restricted by the statutory cap referred to above.
Similarly, the statutory cap does not apply where the dismissal was related to a prohibited ground under the Equality Act 2010. In these scenarios the potential awards can be significant.
When an employer has fair cause to end a contract, there is no indemnification granted to the employee.
On the other hand, in case of unfair dismissal, according to Colombian Labour Law there are different types of indemnifications (i.e. legal severance) based on these types of contracts:
i. in fixed-term contracts, the indemnification is calculated with the salary days pending until the end of the contract;
ii. in contracts for a specific project or service, the indemnification is calculated with the salary days pending until the end of the contract with a minimum of 15 days;
iii. in indefinite-term contracts, the indemnification is established as follows:
- For employees hired after 27 December 2002:
- If the employee has a salary ranging from one to ten Colombian minimum monthly wages, 30 days of salary for the first year of seniority, and 20 additional days for every additional year or in proportion if less.
- If the employee has a salary of more than ten Colombian minimum monthly wages, 20 days of salary for the first year of seniority and 15 additional days for every additional year or in proportion if less.
- For employees hired between 1 January 1981 and 27 December 2002: 45 days of salary for the first year of seniority and 40 additional days for every additional year or in proportion if less.
- For employees hired prior to 1 January 1981: the employee is entitled to choose between reinstatement or damages consisting of 45 days of salary for the first year of seniority and 40 additional days for every additional year or in proportion if less. However, if the employee chooses reinstatement and it is not possible, a judge will determine whether damages should be paid consisting of 45 days of salary for the first year of seniority and 30 additional days for every additional year or in proportion if less.