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.
If the employment contract is terminated because a certain job becomes unnecessary, the employer must pay severance pay as set by the labour rulebook/collective agreement or employment contract.
Severance pay is given to employees who have worked for that employer longer than 18 months.
The severance pay is given as the sum of one third of the employee's average gross salaries paid over the previous six months, for each year of work with that employer, or 1/3 of the average monthly salary without taxes and contributions in Montenegro, if this is more favourable for the employee.
Severance pay cannot be lower than three average monthly salaries without taxes and contributions in the past 6 months, or three times the average monthly salary without taxes and contributions in Montenegro, if this is more favourable for the employee.