REVIEW OF LABOUR LAW: SEVERANCE PAY
BTIA has been asked by the Belize Chamber of Commerce and Industry to provide its position on
the matter of Severance Pay. This is an attempt to present to Government and the Unions a possible
alternative to the proposal of Cabinet. The proposal from Cabinet would have been disastrous for
businesses, and even the recommended alternatives represent significant increases in severance
or pension expenses for employers.
Kindly review the details carefully at this link, and provide us with feedback so that we can present
a position on behalf of the tourism industry. Thank you.
The Cabinet issued a directive to the Ministry of Labour to review the Labour Laws with a view to
identifying those provisions that are considered most critical to the welfare of workers. With this
in mind the following areas are being looked at:
Oral Contracts of Service · Hours of Work, Overtime and Holidays · Severance Pay Provisions.
The most significant amendment is the one regarding severance pay. What we currently have is:
Where a worker who has been continuously employed by any employer for a period of ten years or more
retires on or after attaining the age of sixty years or on medical grounds he shall be paid a
severance pay of one week’s wages in respect of each year of service.
Where the employment of a worker who has been continuously employed for a period of five years
or more is terminated on grounds of redundancy the worker shall be paid by such employer a
severance pay of one week’s wages in respect of each year of service.
Provided that the maximum severance pay shall be limited to forty-two weeks wages:
A worker with a minimum of ten years’ continuous service who resigns his employment shall be eligible
for a gratuity equal to severance pay computed in accordance with the foregoing provisions of
this section the recommendations that are being made are as follows:
Redundancy Termination Either Side
1. Five to Ten years of service – Two weeks pay for each year of service.
2. Ten years of service and over – Three weeks of pay for each year of service.
Retirement/ Ill- Health / Death
1. Five to Ten years of service – Three weeks pay for each year of service.
2. Ten years of service and over – Five weeks pays for each year of service.
The Belize Chamber of Commerce & Industry counter-proposed with 2 options:
Option 1:
Five to Ten years of Service – One and one half weeks pay for each year of employment calculated
at average rate (First year rate plus last year divided by two);
Ten years service and over: Two weeks pay for each year of employment calculated at average rate
(First year rate plus last year divided by two)
Option 2:
This option is trying to move away from Severance and into pension. The scheme would be mandatory
and on a contributory basis with employees contributing 50% and Employers 50% and will have
the following features:
• Amount of contribution for the employee would range between .5 week to 1.5 weeks for each year;
• Employers contribution would be mandatory at 1.5 weeks for each year of service of the employee;
• The employee’s portion of the pension scheme inclusive of contributions would be transferable;
• Proceeds of the fund would be payable to employees at retirement age;
• Investment of pension funds would be done in Banks only and in the form of CDs;
• Non-taxable as salary before contribution and non-taxable at distribution;
• Fund may be used to support education of child, but this would have to be paid back by either child
or employee; additionally, no interest would accrue on disbursed funds for education;
• In the case of an employee death prior to disbursement, the fund would be paid within a reasonable
time to a third party beneficiary named by the deceased worker.
It would be necessary that the Government pass regulations governing the management and handling
of the fund to ensure the fund’s integrity. This would need to include stiff penalties for non-compliance.
The above is an attempt to present to Government and the Unions, a possible alternative to the proposals
of Cabinet. The proposal from Cabinet would have been disastrous for businesses and the above
option also implies significant increases in severance or pension expenses for employers.
Please provide us with your feedback so we can issue a position where the tourism Industry may be
comfortable.
The Belize Chamber of Commerce and Industry met with the Ministry of Labour and the NTUCB on
Friday, January 16 to discuss the severance issue. Below is a synopsis of the NTUCB’s response
to their proposals:
• NTUCB said that the severance pay for 5-10 years of service should be 2 weeks wage for each year
of service calculated using the workers last salary. This differs from the Chambers position by 1/2 week
salary and the formula used. The Chamber had proposed 1-1/2 weeks pay calculated at an average
of the 1st and last wage.
• NTUCB said that the severance pay for 10 years and over service be 3 weeks wage for each year of
service calculated utilizing the workers last salary. This differs from the Chambers position by
1 week salary and the formula used. The Chamber had proposed 2 weeks pay for each year of employment
calculated at an average of 1st and last wage.
• The NTUCB does not support option 2 that the Chamber had proposed implementing a Pension plan.
