Employer’s Obligation Regarding Redundancy and Severance Payments

The Ministry of Economy and Labour has received queries from employees and members of the public pertaining to redundancy and the payment of severance allowance.

While the Government of Bermuda appreciates the financial position that some employers may be in during this time, section 30 of the Employment Act 2000 (the “Act”) clearly sets out employers’ responsibilities when contemplating redundancies.

Every employer has a duty to inform and consult with an employee and their representative (union or otherwise) on a proposed redundancy fourteen (14) days prior to giving the employee notice in writing that they are being made redundant.

Under their duty to inform, the employer shall inform the employee and their trade union or other representative of the conditions of redundancy that exist, the reason(s) for the contemplated termination, the number and categories of employees likely to be affected and the period over which the termination is likely to take place.

Under their duty to consult, the employer shall consult with the employee and their trade union or other representative on the possible measures that can be taken to avoid or minimise the adverse effects of the redundancy and the possible measures that can be taken to mitigate the adverse effects of the termination on the affected employees.

No sooner than 14 days after the employer has informed and consulted with the employee and their respective representative, may they then provide notice of the termination for redundancy in accordance with the notice period set out in the statement of employment or in the Act.

The conditions of redundancy are listed under section 30(3) of the Act and include:

1. 1. the modernisation, mechanisation or automation of part or all of the business;
   2. the discontinuance of part or all of the business;
   3. the sale or disposal of the business;
   4. the reorganisation of the business;
   5. the reduction in the business as a result of economic conditions, volume of work or sales, reduced demand or surplus inventory; and
   6. the impossibility or impracticality of carrying on the business at the normal rate or at all due to:

1. shortage of materials;
2. mechanical breakdown;
3. act of God; or
4. circumstances beyond the employer’s control.

Once made redundant, an employee is entitled to severance pay in the amount of two weeks’ wages for every completed year of employment for the first ten years and three weeks’ wages for each subsequent year, up to a maximum of 26 weeks’ wages. This payment is exclusive of an employee’s right to notice pay, which is also payable at this time. Where an employee’s contract of employment or collective agreement provides for a higher amount of payment than what is specified in the Employment Act 2000, that amount should be provided.

The Department of Labour provides information to employers and employees anonymously per the Employment and Labour Code, and employers are urged to contact this office for any assistance.

The Department of Labour is located at 23 Parliament Street, Hamilton, and they are open Monday to Friday from 8:45 a.m. to 5:00 p.m. and welcome walk-ins and appointments.

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