Terminal Benefits

All about Terminal Benefits in the Workplace, Terminal Benefits and Leave and Termination of Service, Terminal Benefits and Salaries and Wages and more on AfricaPay Tanzania.



Complete our Salary Survey and Win a Wage!



What are Terminal Benefits?

Terminal Benefits are final entitlements of an employee upon termination of an employment contract. 

What is an employee entitled to as terminal benefits upon the termination of their employment contract?

Generally, Section 44 of the Employment and Labour Relations Act, 2004 provides the following for upon termination of the employment contract; 

  • Any remuneration for work done before termination
  • Any annual leave pay due to an employee for leave that employee has not taken
  • Any annual leave pay accrued during any incomplete leave cycle
  • Any notice pay due
  • Any severance pays due if an employee qualifies for this
  • Any transport allowance that may be due
  • Certificate of Service

The above-mentioned are generally described as terminal benefits; however they are not automatically granted. Some are granted depending on various circumstances such as grounds of termination, type of employment contract, the length of service to your employer etc.

If an employee's contract has been terminated due to misconduct, are they still entitled to Severance Pay?

According to the Employment and Labour Relations Act, 2004 an employee shall not be entitled to severance pay if the termination was on the grounds of misconduct. The employer is correct to refuse to payseverance pay. Another example where an employer can refuse to grant severance pay is if an employee is terminated on the grounds of capacity or operational requirements, and unreasonably refuses to accept alternative employment with that employer.

Another condition for an employee to be granted severance pay is that the employee must have completed 12 months continuous service with an employer and that the termination was initiated by the employer.

Is an employee entitled to Severance Pay upon their retirement?

From a recent amendment of Section 42 of the Employment and Labour Relations Act, 2004, an employee who has retired from employee is not entitled to severance pay. The logic behind this is that the retired employee will be receiving pension from the respective pension fund. The amendment is provided under part V of the Written Laws (Miscelleneous Amendments) Act No. 3 of 2010. You will therefore not be entitled to severance pay upon your retirement apart from your pension fund. Another scenario where an employee will not be entitled to severance pay is when an employee was working on a fixed term contract and the duration has automatically expired.

How is Severance Pay calculated?

Severance pay means an amount at least equal to seven days basic wage for each completed year of continuous service with that employer up to a maximum of ten years. Therefore in calculating severance pay you multiply seven days’ salary by the number of years that an employee has rendered services to an employer with a maximum of 10 years.

What is Notice of Termination? How is notice given? Is it mandatory?

Notice of Termination is notification from either party in the employment contract that one party in the contract is intending to terminate the contract of employment at a given time. Notice period differs in the following way:

If notice of termination is given in the first month of employment the period of notice shall not be less than seven days. The notice period is the period of notice upon which the employee is supposed to work from the time the notice is tendered to the time when the termination becomes effective.

If the employee is employed on a daily or weekly basis the notice period shall be four days and if the employee is employed on a monthly basis the notice period shall be 28 days. A contract of employment can provide for a longer notice but  the agreed notice period shall be of equal duration for both employer and the employee. The Notice of Termination shall state the reason for termination and the date on which the notice is given.

Can an employer terminate an employee immediately without allowing them to work during the notice period. Does the law allow this?

In event the employer wants to terminate an employee without allowing her/him to serve the notice period the employer will be required to pay the employee the amount that an employee would have received if she/he had worked during the notice period. This is what is usually referred to as payment in lieu of notice. 

The same is the case when an employee resigns immediately without serving the notice as required under the law and contract of employment. Section 41 (6) provides that when an employee refuses to work during the notice period, an employer may deduct any money due to that employee on termination; in other words, the amount that would have been due to the employee if the employee had worked during the notice period.

Must I, as an employer, pay for transportation after a contract of employment is terminated?

In the event the contract of employment is terminated in a place other than where an employee was recruited, they will be entitled to transportation to the place of recruitment for themself and their personal effects. An example is when an employee has been recruited in Dodoma but transferred to a branch office in Arusha. If terminated while in Arusha the employer will have to transport the employee to place of recruitment which is Dodoma. The employer will chose whether to:

  • Pay transport allowance or transport the employee and personal effects or
  • Pay for the transportation of the employee to the place of recruitment or
  • Pay the employee an allowance for transportation to the place of recruitment and daily subsistence between the date of termination of the contract and the date of transporting the employee and her/his family to the place of  recruitment .

What happens if an employee is terminated but they have outstanding leave they have not taken?

In the case of accrued leave upon termination the employer shall pay an employee on a pro rata basis an amount of money in substitution for the annual leave to which that employee is entitled - provided that it is taken not later than six months after the end of leave cycle or twelve months after the end of leave cycle if  (if the employee consented or extension is justified by operational requirements). If the failure to request for leave was perpetuated by the employee themselves then they will not be entitled to accrued leave.

Is Certificate of Service and Notice mandatory even when terminated on misconduct?

Yes. Notice and Certificate of Service are mandatory regardless of the reason for termination. 




Complete our Salary Survey and Win a Wage!