Termination of Employment Law of 1967 (L. 24/67) and Redundancy of employees
This article will examine the termination of employment due to redundancy reasons in Cyprus based on the Termination of Employment Law L.24 / 67 (hereby referred to as «The Law»).
Redundancy is considered to be as one of the most common legal reasons for terminating the employment of an employee based on article 5 (b) and section (IV) of the Law.
Based on the Law, an employee is entitled to redundancy payment when his employment is terminated for any of the following reasons:
- The employer has ceased or intends to cease to carry on the business in which the employee was employed.
- The employer ceases or intends to cease to carry on business in the place in which the employee was employed.
- Because of any of the following other reasons concerned with the operation of the business:
- (a) Modernization, mechanization, or any other change in the methods of production or organization, which reduces the number of employees necessary,
- (b) Changes in products or production methods or in the skills needed on the part of the employees,
- (c) Closing of departments,
- (d) Marketing or credit difficulties,
- (e) Lack of orders or raw materials,
- (f) Scarcity of means of production,
- (g) Contraction of the volume of work or business.
However, in some cases a dismissed employee is not entitled to redundancy payment, even if he has been declared redundant, where:
- The employer, before terminating the employment, makes an offer of suitable alternative employment and the employee unreasonably refuses this offer.
- The employment has been terminated as a result of the transfer of the business to another employer, who has renewed the contract of employment.
- The employer is a registered company under the Companies Law and the employee is transferred to a suitable post in another company associated with the former company. Two companies are treated as associated companies, if one of them is a subsidiary of the other or, if both of them are subsidiaries of a third company. The term ‘subsidiary’ has the meaning assigned to it by section 148 of the Companies Law (Cap.113 as amended).
- Before the termination of employment another employer, who is a company in which the previous employer is the main shareholder or exercises substantial control, offers the employee suitable employment.
For an employee to be entitled to redundancy payment from the Redundancy Fund (hereby referred to as «the Fund»), all the below circumstances must apply simultaneously:
- The employee has not attained the pensionable age (65 years)
- Continuous employment with the same employer for at least 104 weeks. An employee with less years of employment, may be considered as redundant, but he is not entitled to a redundancy payment.
- The termination of the employment has been made by the employer.
Regarding point 2 above, seasonal employment with the same employer for at least 15 weeks on average over the period of such employment, is deemed to be continuous.
Where an employee is redundant and eligible to receive amounts from the Fund, the amount he receives as per Table 4 of the Law, is calculated considering the period of the employee’s continuous service and his final wages, as follows:
Period of continuous employment | Amount of redundancy payment |
Up to 4 years | 2 weeks wages for each continuous period of employment of 52 weeks |
Above 4 and until 10 years | 2 ½ weeks wages for each continuous period of employment of 52 weeks |
Above 10 and until 15 years | 3 weeks wages for each continuous period of employment of 52 weeks |
Above 15 and until 20 years | 3 ½ weeks wages for each continuous period of employment of 52 weeks |
Above 20 and until 25 years | 4 weeks wages for each continuous period of employment of 52 weeks |
- Where the employee who seeks payment from the Fund is a shareholder of a private company and is employed by this company otherwise than under a contract of employment or under such circumstances from which an employer - employee relationship may be derived, the redundancy payment is equal to one percent (1%) of his weekly wage multiplied by 52 and by the number of years of employment.
- Where the redundant employee has attained the age of 64 years, the redundancy payment is reduced by 1/12 for each completed month by which the age of the employee exceeds 64 years.
In the case of a redundancy dismissal, under Section 21 of the Law, the employer who intends to declare redundancies, is obliged to give at least one month’s notice to the Ministry of Labour and Social Insurance, informing them of the number redundant employees, the branch or branches of the business affected, the name, occupation, and family responsibilities of each employee to be affected and the reasons for the redundancy.
Moreover, an employee whose employment has been terminated based on redundancy reasons, must apply to the Social Insurance the latest within 3 months from the date of termination.
However, if an employee seeks payment from the Fund, and for any reason it is found that he should not have claimed and/or is not entitled to claim redundancy then, in situations where a person submits a fraudulent claim for payment from the Fund or presents a false declaration/statement or provides false information, he may be called to pay a fine or is subject to imprisonment up to 6 months or may face both sentences. A person who abets any other person to commit any of the above is also subject to the same sentences.
In conclusion, it is important for both employers and employees to consider all the above mentioned prior to proceeding either to terminate an employment or seek a payment from the Fund due to redundancy reasons.
This article does not constitute legal advice. For more information you may contact us directly at info@pelecanoslaw.com
