Redundancy and Severance Pay: Procedure, Notice, Payments

When a redundancy is lawful

Termination of an employment contract at the employer's initiative must be justified (Labor Code, Art. 161). For a redundancy this means the company has a real reason: technology, structure or workload is changing. A formal renaming of a position with the same duties is usually viewed by courts as no redundancy at all.

Termination on redundancy grounds is allowed only in compliance with Art. 144 of the Labor Code: the employer must offer a transfer to other work. If a collective agreement or collective contract requires the consent of the trade union committee, the employee cannot be dismissed without it (Art. 164); the committee must respond within ten days.

• an order (decision) changing the staff list, with the reasons stated;
• the new staff list with its effective date;
• a list of positions being cut and the employees affected.

Notice and informing the authorities

The employee is notified in writing, against signature, at least two months in advance (Labor Code, Art. 165). The employer may replace this period with monetary compensation equal to the length of the notice period; the compensation does not cancel other payments.

During the notice period the employee is entitled to at least one day a week off, with pay retained, to look for a new job. Periods of temporary incapacity for work are not counted in the notice period (except in a liquidation).

At the same time, at least two months in advance, the employer informs the trade union committee about the planned release of staff and enters data on each employee being released into the Unified National Labor System for the local labor authority (Art. 166).

Offering other work and who stays

If work under the previous job function cannot continue, the employer must offer a transfer to other work matching the employee's specialty and qualification, and if there is none, any other available work (Labor Code, Art. 144). If there is no permanent work but there is work under a fixed-term contract, that must be offered. Dismissal for redundancy is permitted only if the employee refused the offered transfer, there are no vacancies, or the employee does not meet the requirements of the vacancy.

When only some identical positions are cut, the preferential right to remain applies (Art. 167): employees with higher qualifications and labor productivity stay. Where these are equal, factors include having two or more dependants, no other family member with independent earnings, long service with this employer, disability, or an occupational injury received at this employer. The order of the factors does not matter — the employee with more of them prevails.

Who cannot be made redundant

Article 163 of the Labor Code prohibits termination at the employer's initiative during temporary incapacity for work, leave, a business trip, or release from work to perform state or public duties, and without observing the guarantees for pregnant women and employees with a child under three (Arts. 408 and 409).

These restrictions do not apply only when the organization is liquidated. In a staff reduction, the dismissal date is moved until the employee returns from sick leave or vacation.

Severance pay: amount by length of service

Severance pay is due when an employment contract is terminated at the employer's initiative, except on grounds related to the employee's misconduct (Labor Code, Art. 173). Redundancy is not a misconduct ground, so severance pay is due.

The amount depends on the length of service with this employer and may not be less than:

• 50% of average monthly earnings — for service of up to three years;
• 75% — from three to five years;
• 100% — from five to ten years;
• 150% — from ten to fifteen years;
• 200% — over fifteen years.

Final settlement and taxes

All amounts due to the employee are paid on the day the employment contract ends (Labor Code, Art. 172): salary for time worked, compensation for unused leave, severance pay, and compensation in lieu of notice if chosen. On the same day the employer issues the work record book or an extract from the electronic work record book and a copy of the order (Art. 171).

The Tax Code of the Republic of Uzbekistan classifies severance pay and other payments on termination of employment as other income of an individual (Art. 377, item 9), not as remuneration for work. A resident's income is subject to PIT at 12% (Art. 381). The object of social tax is the employer's expenses on remuneration for work (Art. 403), so the payment must be classified correctly in the payroll.

Timeline checklist

• day 0 — order changing the staff list, notice to the trade union committee and data entry into the Unified National Labor System;
• day 0 — written notices to employees against signature;
• within two months — offers of vacancies (in writing, with a note of consent or refusal), one free day a week for job search;
• before the dismissal order — check sick leave, vacations, pregnancy, children under three;
• dismissal day — order, final settlement, severance pay, work record book or extract.