Navigating employment termination in Bhutan requires a clear understanding of the country's labor laws and regulations. Employers must adhere to specific procedures, notice periods, and severance entitlements to ensure compliance and avoid potential disputes. The process varies depending on the reason for termination, the employee's tenure, and their employment category.
Properly managing the termination process is crucial for businesses operating in Bhutan. It involves not only legal compliance but also ethical considerations and maintaining good industrial relations. Employers need to be diligent in documenting reasons, following prescribed steps, and calculating final dues accurately according to the prevailing labor code.
Notice Period Requirements
The required notice period for terminating an employment contract in Bhutan typically depends on the employee's length of service. These periods are minimum requirements and may be extended by mutual agreement or as stipulated in the employment contract, provided they are not less than the statutory minimums.
| Length of Continuous Service | Minimum Notice Period |
|---|---|
| Less than 6 months | 1 week |
| 6 months to less than 5 years | 1 month |
| 5 years or more | 3 months |
Notice must generally be given in writing by either the employer or the employee. Payment in lieu of notice is permissible, calculated based on the employee's regular wages for the notice period.
Severance Pay
Severance pay is a statutory entitlement for employees whose contracts are terminated under certain circumstances, primarily in cases of redundancy or termination without fault on the part of the employee. It is calculated based on the employee's length of service and their last drawn basic wage.
The standard formula for calculating severance pay is:
Severance Pay = (Last Drawn Basic Wage / 30) * 15 * Years of Service
- Last Drawn Basic Wage: The employee's basic monthly wage at the time of termination.
- 30: Represents the number of days in a month for calculation purposes.
- 15: Represents 15 days' wages per year of service.
- Years of Service: The total number of completed years of continuous service with the employer.
Partial years of service are typically prorated. Severance pay is usually not applicable in cases of termination for serious misconduct or voluntary resignation.
Grounds for Termination
Employment contracts in Bhutan can be terminated on various grounds, broadly categorized as termination with cause and termination without cause.
Termination With Cause: This occurs when an employee's conduct or performance provides a valid reason for dismissal. Grounds may include:
- Serious misconduct (e.g., theft, fraud, insubordination, violence).
- Repeated or persistent poor performance despite warnings.
- Breach of company rules or policies.
- Absence without leave for a specified period.
- Dishonesty or willful damage to employer property.
Termination for cause typically requires following a disciplinary process, including warnings and an investigation.
Termination Without Cause: This refers to termination for reasons not related to the employee's fault, such as:
- Redundancy due to restructuring, automation, or economic downturn.
- Closure of the business or a specific department.
- Incapacity due to illness or injury (subject to specific conditions and medical evidence).
Termination without cause generally requires providing the statutory notice period or payment in lieu and paying severance pay.
Procedural Requirements for Lawful Termination
To ensure a termination is lawful, employers must follow specific procedural steps, particularly in cases of termination for cause or redundancy. Common requirements include:
- Warning Letters: For performance or minor misconduct issues, employers must typically issue written warning letters, giving the employee an opportunity to improve or correct their behavior. The number and timing of warnings may be prescribed by law or company policy.
- Investigation: In cases of serious misconduct, a fair and impartial investigation should be conducted. The employee should be informed of the allegations and given a chance to respond.
- Show Cause Notice: Before making a final decision to terminate for cause, the employer may be required to issue a show cause notice, asking the employee to explain why their employment should not be terminated.
- Written Termination Notice: A formal written notice of termination must be provided to the employee, clearly stating the reason for termination and the effective date.
- Payment of Final Dues: All outstanding wages, accrued leave pay, severance pay (if applicable), and any other entitlements must be calculated and paid to the employee upon termination.
- Documentation: Maintain thorough records of all steps taken, including warning letters, investigation findings, meeting minutes, and the final termination notice.
Common pitfalls include failing to issue proper warnings, not conducting a fair investigation, neglecting to provide written notice, or incorrectly calculating final dues.
Employee Protections Against Wrongful Dismissal
Bhutanese labor law provides employees with protections against unfair or wrongful dismissal. An employee who believes their termination was unlawful may have recourse through established grievance mechanisms and labor dispute resolution processes.
Grounds for claiming wrongful dismissal may include:
- Termination without a valid reason (cause or redundancy).
- Failure to follow the correct procedural requirements.
- Termination based on discrimination (e.g., gender, religion, ethnicity).
- Termination for exercising a legal right (e.g., joining a union, filing a complaint).
If a termination is found to be wrongful, remedies may include reinstatement, payment of back wages, or compensation. Employers must ensure their termination practices align with the principles of fairness and due process as outlined in the labor regulations.
