An employee’s regular employment can be discontinued by giving notice or cancellation of the employment contract, but the employer must always have the grounds for this as required by the Employment Contracts Act. Before giving notice, the employer must ensure that there is a legally justified reason for giving notice. The notice should always be given in writing.
Upon giving notice, an employer should request advice and help from the advisers of the employer’s own federation. If the employer is not a member of an employers’ organisation, advice can also be obtained from solicitors, law firms, legal aid offices and the Occupational Safety and Health Administration.
If the termination of employment proves to be unlawful, the employer is liable to pay reimbursement for unlawful dismissal or termination of employment amounting to a minimum of three and a maximum of 24 months’ wages. The employer may also have to pay other compensation.
An employee may give notice without any specific reason. Both parties must comply with the periods of notice specified by law.
Fixed-term employment terminates at the end of the agreed term of employment, and it can be terminated only due to an extremely weighty reason.
An employer may only terminate employment due to proper and weighty reasons. In accordance with the Employment Contracts Act, the following are considered such reasons:
serious breach of obligations having a fundamental impact on the employment relationship
such fundamental changes in the conditions necessary for working related to the employee's person that render the employee no longer able to cope with his or her work duties.
According to law, factors such as the following are not considered proper bases for termination:
the employee’s illness
participation in a strike
resort to means of legal protection.
Employees who are pregnant or on maternity, paternity, parental or childcare leave are under special protection against dismissal.
Financial or production-related reasons
In most cases, termination of employment is justified for financial and production-related reasons. In this case, the work to be offered has diminished substantially and permanently for financial or production-related reasons or for reasons arising from the reorganisation of the employer's operations. A temporary reduction of work does not entitle the employer to terminate the employment, nor do situations where new employees are hired.
When work diminishes, the employer must first try to arrange other work or training for new duties for the employee. Only if the employer cannot provide such work may the employee be given notice.
If the company employs a minimum of 20 employees on a regular basis, prior to giving notice due to financial or production-related reasons the employer must negotiate with the personnel on the grounds, impacts and alternatives to the termination of employment (statutory employer-employee negotiations). It must not be decided which employees will be given notice prior to the statutory negotiations.
Cancellation of the employment contract
Cancellation of the employment contract is a more stringent action than giving notice, and it requires such weighty grounds that the employer cannot reasonably be expected to continue the contractual relationship, even for the period of notice.
Weighty grounds include:
material breach of obligations having a fundamental impact on the employment relationship.
If the employment contract is cancelled, the employment terminates immediately and no period of notice will be observed. A fixed-term employment contract can also be cancelled.
An employer must pay particular caution when considering the cancellation of an employment contract. An employment contract can only be cancelled due to reasons related to the employee’s person, and an employment contract cannot be cancelled by appealing to production-related and financial grounds.
If you cancel an employment contract without legal grounds, you can be obligated to pay the employee compensation for unjustified termination of employment.
Arranging work during the period of notice
When an employer receives information from an employee on the termination of employment, it must be planned how any incomplete tasks that are the responsibility of the employee will be arranged. The employee can, for example, be requested to compose a list of matters that are incomplete and that require immediate attention. Usually, the supervisor and the employee together consider how work during the period of notice will be arranged.
Before an employee leaves the company, an exit interview can be arranged to find out the reasons leading to the employee giving notice. At times, issues with the company’s operations emerge, and these should be addressed before recruiting a new employee.
The employer’s attitude towards an employee leaving the company and how the termination of employment is handled are factors that might influence the company’s future recruitment prospects. An employee who leaves contentedly is a smaller risk to the company, and cooperation with such an employee will probably succeed after the termination of employment.