Employee Benefits Upon Termination of Employment in Uganda

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Last updated on May 1st, 2023 at 08:48 am

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A few days ago, a friend, now a former manager of one of the biggest uptown Kampala Hotels called me wailing. Yes, I’ve always known her as a fairly emotional being, but this time, she took it a notch above. She sobbed, “It’s true, it was only one time, three years ago, I got angry with the chefs, removed the trays of pasta from them and threw them down on the hotel floor in full view of my co-workers and the guests. But I was already forgiven! In the last performance appraisals, I outmatched all the other managers. All I have done for that hotel? And now I have been “greeted” by a termination letter from HR and asked to immediately hand over all the hotel’s property…”

Like my friend, many employees encounter the plight of termination of employment. With many hard-hit businesses struggling to sustain their cash flows, and the everyday eventualities in the employment environment, such is an inevitable fate.


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Termination of employment refers to the end of an employee’s contract of employment with an employer. Oftentimes, the termination is initiated by the employer against the will of the employee, before the anticipated end of the contract.

Termination of employment, at the employer’s initiative, could happen due to existent justifiable reasons, for instance, reduction in the workforce which entails layoffs and restructuring, unsatisfactory employee performance or dissolution of the employer. A harmonized-purposive interpretation of Uganda’s employment laws and the decisions of the Industrial (Labour) Court mandate an employer to terminate an employee’s employment contract with a reason.


However, the higher-appellate courts have insistently modified the requirement for a termination reason and equipped employers with absolute powers to terminate employment. Their decisions have been impliedly premised on the ancient common law tenet, “he who hires has the power to fire”. The rationale for this rule is that an employee, though willing, cannot be foisted upon an unwilling employer. The perilous uncertainty of Uganda’s employment laws on the aspect of the requirement for a termination reason has okayed it for the higher courts to overlook the inferable public policy employment norms.

The implication of the above legal evolution has placed the employee into a reign of vulnerability where an employer can terminate the employment relationship at a drop of a hat; at any time, for any or no reason. Notably, even where a contract of employment foreseeably provides reasons or grounds for termination of employment, but the employer terminates without a reason, prevailing now is a petty debate on whether willful failure to adhere to the contractual reasons is of any legal consequence.


Though forsaken into the whims and impulse of the employer; for the employer to cause cessation of the employment at his pleasure, the employee is picked up by the law, dusted off from returning home empty-handed upon the termination of employment. The employment laws embedded under the Employment Act, 2006 and the Employment Regulations, 2011 provide for various benefits that an employee is entitled to after the termination of employment.

These benefits are legally termed terminal benefits and are at times included in employment contracts and Human Resource manuals by employers. They are the final entitlements and exit benefits that an employee should get upon the termination of his/her employment relationship by the employer. These benefits include;

Payment in Lieu of Notice
This is a payment that an employer must make to an employee for not giving an employee an advance appropriate notice that his/her employment will be terminated. It’s the pay that an employer must provide for not having the employee work during the required notice period.

As stipulated under Section 58 of the Employment Act, unless a contract of employment is terminated summarily or due to attainment of retirement age, an employee must receive a notice of termination of employment from the employer.

The notice must be in writing and comprehensible by the employee, and the length of time in the notice must be complied with. For instance, an employer should give not less than two weeks’ notice to an employee who has been in employment for more than 6 months but less than 1 year, a not less than one month’s notice to an employee who has been in employment for more than 12 months but less than 5 years, a not less than two months’ notice to an employee who has been in employment for 5 years but less than 10 years, a three months’ notice to an employee who has been in employment for 10 years or more, and a notice equivalent to the pay period where the pay period within which an employee is paid is longer than the period of the notice that the employee would be entitled to.

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Non-compliance with the pre-requisites for the notice by the employer entitles an employee to payment in lieu of the notice. This was confirmed in the case of Barclays Bank of Uganda Vs Godfrey Mubiri Civil Appeal No.1 of 1998, where the Supreme Court held that,
“a contract of employment can be terminated by giving a contractual notice or upon failure to do so, by payment in lieu of the notice”

payment in lieu of leave or holidays
This payment is made when the employer didn’t grant leave to the employee. According to section 54 of the Employment Act, 2006, an employee is, once in every calendar year, entitled to leave and holidays during the period of employment.

Where such leave is not taken, an employee is entitled to receive, upon the termination of employment, payment proportionate to the length of service for which he/she didn’t receive such a holiday or leave, or compensation for such.

Nevertheless, this terminal benefit is subject to a condition that the employee must have, during the period of his employment, applied/requested for the leave in an annual employment period and the request was denied by the employer. This was the same position in the case of Etuket Vs Kampala Pharmaceutical Industries (1996) Ltd L/D No.272/2014, where the Court stated that,
“There is no doubt that under section 54 of the Employment Act, employees are entitled to a number of days as their annual leave days. However, employees are required to apply for such leave days and only when they are denied to go on leave after expressing interest to exercise this right does the employer get obliged to pay in lieu of such leave. In the absence of an expression of interest to take leave by the claimant, we decline to grant this prayer”

Gratuity refers to a lump sum monetary amount paid by the employer to the employee as a token of appreciation for the service the employee rendered during the period of employment.

Gratuity is ordinarily provided for in the contract of service between the employee and employer, and as such, it is not a benefit that is suddenly claimable after the termination. This position is re-echoed in the case of Etuket Vs Kampala Pharmaceutical Industries (1996) Ltd L/D No.272/2014, where it was held that
“gratuity being an expression of gratitude to the employee for the work done for the employer over time is normally provided for either in the contract or in the Human resource manual. In order to benefit from gratuity after cessation of employment, the employee will prove that the component of gratuity was envisaged in the employment relationship’’

Salary Arrears
The employee is entitled to remuneration for work done before the termination of employment or any outstanding salary or commission at the time of the termination. The arrears could be for a previous pay period and overdue or any commission worked for from the time a notice to terminate the employment was communicated to the employee and due as at the actual date of termination.

The Industrial Court acceded to the above position in the case of Patrick Musakiriza Vs African Vending System Ltd L.D Ref. No.72/2018, where it stated that,
“ it is our position that the respondent(employer) cannot run away from the responsibility to pay the salary arrears”

Severance Pay/Allowance
Severance pay refers to the monetary compensation an employer provides to an employee upon discharge from employment, where the employee was employed for six months or more. One of the instances when an employer is liable to pay severance is when the contract of employment is terminated because of the insolvency of the employer and failure to pay wages. (Section 89 of the Employment Act).

The amount of severance pay payable is subject to negotiations between an employer and employee or workers union or is the monthly salary in each year of employment as held in the case of Donna Kamuli Vs D.F.C.U Bank Labour Dispute No.2/2014, that,
“Severance amount could be agreed on by the employer and the employee…..where there exists no such negotiation or arrangement, the employee would be entitled to a month’s salary for each year such employee worked”

Repatriation simply concerns the return of an employee to his/her home or primary place of residence after the termination of employment. In Uganda, an employer is obligated to either transport the employee to his place of residence or pay a repatriation fee to the employee after terminating his/her employment.

Worthy to note, this benefit is due to an employee recruited for employment at a place which is more than one hundred kilometres from his/her home. An employee who has been in employment for at least ten years is also entitled to repatriation irrespective of his/her place of recruitment.

In termination of employment, repatriation is claimable on termination of a contract by agreement of parties-the employer and employee. (Section 39 of the Act). The termination agreement need not be express as long the notice of termination of employment is accepted by either party. The principles on repatriation after the termination of employment were expounded on in the case of G4S Secure Solutions Uganda Ltd Vs 20 former employees of G4S Security Services Labour Dispute Appeal No.22 of 2017, where the Court affirmed that,
“repatriation embodies transportation of an employee from his workstation to his home. Ordinarily, to repatriate means returning to the origin. The section of the law was intended to help the employee to be able to return home after the termination of his employment. Only those entitled to repatriation in law should be paid based on the law and not on sympathy. For repatriation, the agreement of termination does not have to be mutually negotiated or formally agreed..”

Certificate of Service

A certificate of service is an official document issued by the employer to the employee at the time of termination of employment, containing a statement testifying to the employee’s service. After the termination of a contract of service, an employer, if requested by the employee, must provide the employee with a certificate of service.

Impliedly, the employer is not duty-bound to issue the certificate at his/her initiative.
Although a certificate of service is not a direct and/or financial terminal benefit per se, it is useful to the employee as a reference to potential prospective employers.

The certificate should indicate among other things, the nature of the employer’s business, the name and address of the employer and employee, the length of employment and the capacity in which an employee was employed. The entitlement to a certificate of service by an employee is well within the ambit of Section 61 of the Employment Act, 2006.

Damages or Compensation

Damages are a remedy in the form of a monetary award paid by the employer to the employee as compensation for the loss caused by a wrongful act or violation of some right in termination of employment. Damages are at times, only awarded by the court at the point of adversarial litigation.

These damages range from Punitive, and special to compensatory damages, which are quantified into a sum of money, with each having distinct qualifying circumstances and purpose.

The employer may not be and is not obliged to comply with payment of damages upon the termination, mostly because employers hardly ever agree to certain instances as equivalent to wrongful, illegal or unfair termination.

The compensation or damages are awarded in cases of non-compliance with the due process of termination and unfair termination, and where the court deems the circumstances of the termination as suitable to warrant such damages.


Some of the above benefits are conditional benefits. They are not automatically on hand for an employee simply because his/her employment has been terminated.

An employee must have the grounds of their entitlement short of which he/she may not receive some of the benefits. Where such grounds exist and the employer fails to honour payment of the benefits upon termination of employment, an employee may seek relief from the Labour Office within the area of the employer’s workplace location.

The Author is a Commercial Law Practitioner/Advocate.

For comments and inquiries, contact her at asasiraathens@gmail.com or Mob: +256 771 478 596.

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