Severance pay around the world: What employers owe

The UK has a statutory redundancy pay scheme that applies to employees with two or more years of continuous service. The calculation is based on age, length of service, and weekly pay (capped at £643 per week in 2025/26). The formula gives 0.5 weeks’ pay per year of service for employees under 22, one week’s pay per year for those aged 22 to 40, and 1.5 weeks’ pay per year for those 41 and over, capped at 20 years of service. The maximum statutory payout is relatively modest. Unfair dismissal claims, however, can result in far higher compensation.

For more on employing in the UK, see our UK country guide.

Germany does not have a general statutory severance requirement. However, in practice, severance is almost always paid. The standard formula used by German labour courts as a guideline is 0.5 months’ gross salary per year of service. Termination in Germany is heavily regulated, and employees have strong protections against unfair dismissal under the Kündigungsschutzgesetz (Dismissal Protection Act). If a termination is challenged and found to be unfair, severance can be ordered by the court, often at higher rates. Works council consultation may also be required.

For more on German employment law, see our Germany country guide.

French severance (indemnité de licenciement) is statutory for employees with eight or more months of continuous service. The minimum calculation is one-quarter of a month’s salary per year of service for the first ten years, and one-third of a month’s salary for each additional year. In practice, collective agreements often provide more generous terms. Terminations in France must follow a strict procedural process, and wrongful dismissal claims can add compensation for procedural failures and lack of real and serious cause.

For more on French employment law, see our France country guide.

Denmark does not have a universal statutory severance requirement. The Salaried Employees Act (Funktionærloven), which covers most white-collar workers, provides limited severance. Employees with 12 or more years of service are entitled to one month’s salary. Employees with 17 or more years receive three months’ salary. For employees not covered by Funktionærloven, severance depends entirely on the individual contract or applicable collective agreement.

Notice periods, however, are well-defined under Funktionærloven and increase with tenure from one month to six months. These are separate from severance. For more on hiring in Denmark, see our guide to hiring in Denmark through an EOR and our Denmark country guide.

Dutch severance is structured through the “transition payment” (transitievergoeding). From day one of employment, an employee who is dismissed is entitled to one-third of a month’s gross salary per year of service. The payment is capped at €94,000 (2024 figure, adjusted annually) or one year’s gross salary if that is higher. The transition payment applies to most terminations including non-renewal of fixed-term contracts, but not to dismissals for serious misconduct (ontslag op staande voet).

For more on Dutch employment law, see our Netherlands country guide.

Statutory severance in Spain depends on the type of termination. For objective dismissals (economic, organisational, technical, or production-related reasons), the entitlement is 20 days’ salary per year of service, capped at 12 months’ pay. For unfair dismissal (improcedente), the compensation rises to 33 days’ salary per year of service (for contracts after February 2012), capped at 24 months. Older contracts may carry higher rates under transitional provisions.

For more on Spanish employment law, see our Spain country guide.

Italian severance takes a unique form. Every employee accrues a “trattamento di fine rapporto” (TFR) from the start of employment. The annual accrual is approximately one month’s salary (calculated as annual gross salary divided by 13.5), adjusted for inflation. This is paid out at the end of the employment relationship regardless of the reason for termination. It functions more like a deferred compensation fund than traditional severance. Additional compensation may be owed for unfair dismissal.

For more on Italian employment law, see our Italy country guide.

Ireland provides a statutory redundancy entitlement for employees with two or more years of continuous service. The calculation is two weeks’ pay per year of service plus one additional week’s pay, subject to a weekly earnings cap (€600 per week in 2024, check for 2026 updates). The payment applies specifically to redundancy situations, not to all terminations. For more on Irish employment law, see our Ireland country guide.

The US has no federal statutory severance requirement. Severance is a matter of company policy or individual negotiation. The WARN Act requires 60 days’ notice (or pay in lieu) for mass layoffs and plant closings, but this applies only to employers with 100 or more employees. In practice, many US companies offer severance packages in exchange for a release of claims, but they are under no legal obligation to do so.

For more on US employment law, see our United States country guide.

Canadian severance requirements come from both federal and provincial law. In Ontario, employees with five or more years of service at a company with payroll of $2.5 million or more are entitled to statutory severance pay of one week per year of service, up to 26 weeks. This is in addition to notice of termination or pay in lieu. Other provinces have different rules. Common law (court-imposed) notice periods can be far more generous than statutory minimums, sometimes reaching 24 months for long-serving senior employees.

For more on Canadian employment law, see our Canada country guide.

Brazilian employers must pay a fine of 40% of the total FGTS (Fundo de Garantia do Tempo de Serviço) balance when terminating an employee without cause. FGTS is a mandatory monthly deposit of 8% of the employee’s salary into a government-held fund. Over a long employment relationship, the 40% penalty on the accumulated balance can represent a large sum. This is in addition to notice periods, proportional vacation pay, and 13th salary.

For more on Brazilian employment law, see our Brazil country guide.

Mexican severance for unjustified dismissal includes three months’ salary plus 20 days’ salary per year of service, along with proportional bonuses, vacation premium, and accrued benefits. The total cost of termination in Mexico is among the highest in the Americas.

For more on Mexican employment law, see our Mexico country guide.

Australia’s National Employment Standards require redundancy pay based on years of service, ranging from four weeks’ pay (one to two years) to 16 weeks’ pay (nine to ten years), with no increase beyond ten years. Small businesses (fewer than 15 employees) are exempt from statutory redundancy pay requirements.

For more on Australian employment law, see our Australia country guide.

Indian severance law (the Industrial Disputes Act, 1947) requires “retrenchment compensation” of 15 days’ average pay per year of continuous service for employees who have worked 240 or more days. Retrenchment requires government approval for establishments with 100 or more workers in many states, making the process slow and uncertain.

For more on Indian employment law, see our India country guide.

Japan has no statutory severance requirement. However, company retirement allowances (taishokukin) are extremely common and often function like guaranteed severance. Dismissal in Japan is very difficult under the doctrine of abusive dismissal, and courts often award large settlements. The practical cost of termination is high even without a statutory formula.

South Korean employers must pay severance equivalent to 30 days’ average salary per year of continuous service for all employees who have worked one year or more. This applies regardless of the reason for termination, including resignation. It is one of the few countries where severance is owed even when the employee leaves voluntarily.

The UAE’s end-of-service gratuity entitles employees who have completed one year of service to 21 days’ basic salary per year for the first five years and 30 days per year for each additional year. The total is capped at two years’ salary. Recent changes allow employees to opt into a savings scheme (DEWS) as an alternative.

For more on UAE employment law, see our United Arab Emirates country guide.

South Africa’s Basic Conditions of Employment Act requires one week’s severance pay per completed year of service for employees dismissed for operational requirements (redundancy). This is a minimum, and sector-specific agreements or individual contracts may provide more.

For more on South African employment law, see our South Africa country guide.

Nigerian labour law provides for severance based on contract terms and industry practice. The Labour Act does not prescribe a specific severance formula for most employees, but termination without proper notice or compensation can lead to claims.