Termination of the Employment Relationship in Uganda

Key Employer Obligations

Cristal Advocates

Termination of the Employment Relationship in Uganda

Cristal Knowledge Series June 2020

Cristal Advocates 1
Termination of the Employment Relationship in Uganda
Key Employer Obligations

1. Introduction

The employment relationship in Uganda is principally regulated by the Employment Act 2006 (“the Act”) and the contract of
employment also known as a contract of service. The law regulates the rights and obligations of the parties namely employer
and employee not only during the life of the employment contract but also upon its cessation. In this article, we address the
different options for ending an employment relationship and the attendant legal obligations on the employer.

2. Termination

Termination marks the end of an employment contract. It may be ended by mutual agreement between the employer and
employee or unilaterally finished by either of them. The Act envisions various circumstances for terminating an employment
relationship as highlighted below.

a. Termination with notice or payment in lieu of notice

The Act allows an employer to terminate an employment contract by issuing an advance notice of termination or making a
payment in lieu of the notice. Thus, an employee is entitled to be given an advance notice of termination or paid an advance
salary instead of the notice. The notice period an employee is entitled to depends on the terms of the employment contract
but the Act prescribes minimum notice periods below.

• There are no notice requirements for employees who have worked for less than six months.
• Two weeks’ notice for an employee who has worked for more than six months but less than one year.
• One month notice where an employee has worked between one year and five years.
• Two months’ notice where an employee has worked between 5 years and 10 years.
• Three months’ notice where an employee has worked for 10 years or more.

Uganda’s Industrial Court has stressed that an employer must provide reasons for termination to the affected employee.
Thus, this provision does not give employers absolute authority to carry out terminations at will.

b. Termination by an employee who has been served a notice by the employer

Where an employee is served a notice of termination by the employer, he/she may terminate the contract of employment
before the end of the notice period. There is however no express requirement in the Act for the employee to compensate the
employer for the remainder of the notice period.

c. Expiration of the contract of employment

Where an employment contract is for a fixed period, it terminates upon the expiration of that period. The Industrial Court has
explained that the employer does not have to provide reasons for termination of a fixed contract or issue an advance notice
to the employee. See Emau Jimmy and 5 Others vs. Ketron Development Services Ltd (Labour Dispute Reference No. 179
of 2017). That said, care should be taken with the drafting of renewal clauses. Many issues arise where the employer seeks to
terminate an employee’s contract which is stated to be renewable, whether the renewal is automatic or is dependent upon the
occurrence of stated conditions.

d. Insolvency or bankruptcy of the employer

An employment relationship will terminate where the employer is declared bankrupt or in the case of corporate bodies,
insolvent and wound up. In this case, the law deems the employment contract terminated after one month of the declaration
of bankruptcy or insolvency. Wages and all other payments have priority over all other claims on the estate of the bankrupt
or assets of the insolvent accruing for 26 weeks before the declaration of bankruptcy or winding up.

e. Sickness of the employees

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 Termination of the Employment Relationship in Uganda
Key Employer Obligations

Employees unable to perform duties due to sickness are entitled to full pay and all benefits and privileges of employment for
the first month of sickness. But if the sickness persists, the employer is entitled to terminate the employment contract at the
end of the second month.

f. Inability to pay wages

Where the employer is unable or refuses to pay wages, both the employer and the employee are entitled to apply to the
Labour Officer to declare the contract terminated. Even in the face of such a declaration, the employer is obliged to make
good any payment and other obligations pending up to the date of termination.

g. Unreasonable conduct by the employer

The employee is entitled to terminate an employment contract with or without notice if subjected to unreasonable conduct
by the employer. The Act does not provide for what amounts to unreasonable conduct, so one can only assume that the test
is a subjective one.

Nonetheless, the Industrial Court has pronounced itself on the question of unreasonable conduct on a number of occasions.
In Muyimbwa Paul vs. Ndejje University (Labour Dispute Reference No. 222 of 2015), the Court ruled that demotion of an
employee without giving them an opportunity to be heard was unreasonable conduct. Similarly, in Nyakabwa Abwooli vs.
Security 2000 Ltd (Labour Claim No. 108 of 2014) removal of instruments of an office without providing an alternative was
held to constitute unreasonable conduct. The Industrial Court further explained that for conduct to amount to unreasonable,
it must be a serious breach, illegal, injurious to the employee making it impossible for the employee to continue working. 

h. Death of an employee

Death of an employee terminates an employment contract but the employer must pay to the deceased employee’s estate any
outstanding salaries and benefits at the time of the employee’s death. If the employee died at the workplace or in transit to
the workplace, the employer has additional obligations to notify the Labour Officer of the death and transport the deceased’s
body to its burial place.

i. Summary dismissal

An employer is entitled to summarily terminate an employment contract where the employee has fundamentally breached
the terms of their employment. What amounts to fundamental breach is a question of fact and the circumstances giving
rise to summary dismissal proceedings are usually spelt out in the employer’s Human Resources Manual. The hallmark of
summary dismissal is that the employment contract is terminated without notice or payment in lieu of notice or less notice
than required.

Prior to summary dismissal, the employer must hold a disciplinary hearing and establish that the employee is guilty of the
conduct complained of. The Industrial Court has explained that the rationale for holding a disciplinary hearing is to give the
employee an opportunity to defend himself/herself against the allegations made against them (see Levi Malinzi vs. Uganda
Printing and Publishing Corporation, Labour Dispute No. 50 of 2015, and Dr. Omona Kizito vs. Marie Stopes Uganda,
Labour Dispute Claim No, 33 of 2015).

3. Employer’s obligations upon termination

The employer’s obligations upon the termination of an employment relationship include:

a. Payment of wages/salary

An employer has a legal obligation to pay wages/salary to their employee in accordance with the employment contract
between the two parties. Upon termination, an employee is entitled to be paid any salary/wages which due to him/her at the
time of termination.

b. Repayment of wages and other payments wrongfully withheld

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Termination of the Employment Relationship in Uganda
Key Employer Obligations

All payments accruing to the employee which are wrongfully withheld or deducted must be paid upon termination. This
includes salaries, allowances and any other benefits where such are withheld or deducted outside of the provisions of the
law. Permitted deductions include taxes and other statutory payments such as social security remittances, payments to
provident funds with the permission of the employee, deductions to cover rent on accommodation provided by the employer,
contributions to labour unions and deductions in circumstances where half pay or part payment is authorised by law such as
suspension or sick leave.

There are also instances where the employee provides express consent such as loan repayments to the employer or third
parties. When payment is not done, the employee is entitled to lodge a claim with the Labour Officer but this must be done
within a period of six years.

c. Payment in lieu of notice

Payment in lieu of notice would be in accordance with the periods already described above or according to each individual’s
contract of employment where the notice periods in the contract exceed those in the law. Where there are no specific provisions
in the contracts or those provisions provide for less periods than what is in the law, the payments would be as follows:

a) No notice pay for staff who have worked for less than six months.
b) Two weeks pay for an employee who has worked for more than six months but less than one year.
c) One month pay where an employee has worked between one year and five years
d) Two months’ pay where an employee has worked between 5 years and 10 years
e) Three months’ pay where an employee has worked for 10 years or more.

d. Payment for outstanding leave days

An employee is entitled to annual leave every year. Where there are outstanding leave days which have not been taken by
the employee at the time of termination, they are calculated into money and paid, unless the employee forfeited them. An
employee forfeits the leave when they are asked to take leave or an opportunity offered for the employee to take leave but
the employee chooses to continue working. This requirement is applicable where an employee has worked for more than six
months.

e. Holiday pay
Where an employee has worked on public holidays, they are entitled to payment at the rate twice that of usual pay for the
public holidays worked. This requirement is applicable where an employee has worked for more than six months.

f. Gratuity

This is a payment in appreciation of an employee’s service to an employer. The Staff Handbook/Human Resources Manual
usually stipulates the conditions for entitlement to gratuity, if any. Where it is provided for in the Manual, it must be paid. If
it is not provided for, there is no obligation to pay.

g. Severance pay

Severance pay or severance allowance is a sum paid by an employer to an employee who has been in continuous service in
circumstances where the employee’s employment contract is involuntarily terminated. Under the Act, to claim severance pay,
an employee must have worked continuously for a period of six months or more.

The Act further lists the circumstances which may give rise to severance pay including; unfair dismissal of the employee,
insolvency or bankruptcy of the employer, death or incapacity of the employee, an order of termination of the contract by the
labour officer due to inability to pay wages by the employer.

Employees who are justifiably dismissed are not entitled to severance pay. The law does not prescribe the sum payable but
leaves it for negotiation between the employer and employee or the Labour Unions.

h. Staff savings schemes, retirement and provident funds

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 Termination of the Employment Relationship in Uganda
Key Employer Obligations

Where an employer runs or supports a common pool such as a savings scheme, retirement and provident funds, any savings
and contributions made by the employee to such a scheme and interest are payable to them, in accordance with the rules
and regulations of the scheme.

i. Salary loans and similar obligations

Where at the time of termination the employee has taken a loan from a financial institution or any lender whose repayment
is guaranteed by their salary, the employer has no obligation to pay the salary loan, or contribute towards its repayment once
the employment ceases. The loan is based on a separate contract independent of the employment contract.

Whereas the Industrial Court had ruled that the employer was obliged to shoulder the loan obligations where the services
of an employee were unlawfully terminated, this position was reversed by the Court of Appeal in DFCU Bank Ltd vs. Donna
Kamuli (Civil Appeal No, 121 of 2016) which re-affirmed the position that the employer is not liable for any loan payments
unless there is an express agreement to that effect between the employer and the employee.

j. Certificate of service

On the employee’s request, the employer must provide a certificate of service to the employee upon termination. The Act does
not prescribe the precise form or appearance of the certificate of service but lists what it should entail including among others,
names and addresses of the employer and employee, the capacity in which the employee was employed, what the employee
earned at the time of termination, and if the employee requests, the reason of termination.

The Industrial Court has explained that a certificate of service is an important document intended to provide general
information regarding the employee so as to enable the next employer to assess the capability of the employee in the next
assignment. The Court further stated that it is also intended to satisfy the employee as to how he/she applied his/her
knowledge and expertise at the completed assignment. See John Tushabwomwe vs. Equity Bank Ltd, Labour Dispute Claim
No. 146 of 2014).

k. Duty to notify the Commissioner for Labour and the Labour Unions

Where the number of employees terminated is 10 or more, it is called collective termination and the employer has a
statutory duty to inform the Commissioner of Labour at the Ministry of Gender, Labour and Social Development, about the
termination, the number of employees affected and the reasons for the termination. The employer is further obligated to
inform representatives of the relevant Labour Unions of the details of the terminations at least four weeks prior to the first
termination.

l. Repatriation

In certain stipulated instances, the Act provides for repatriation of employees from their workplace to their home areas. The
duty to repatriate arises where an employee was employed to work at a station which is located more than 100 kilometers from
their home, and the employment relationship is terminated by expiration of the contract period, for sickness, by agreement
between the employer and employee or by order of the Labour Officer. The employer has a duty to repatriate an employee
who has worked for at least ten years irrespective of how the employment contracts ends.

In addition, where the employee was staying with his/her family at the work place, the employer has a duty to repatriate
them when the employee is repatriated or dies. In the case of G4S Secure Solutions Uganda Ltd vs. 201 former Employees
of G4S Security Services Ltd (Labour Dispute Appeal No. 022 of 2017), the Industrial Court has clarified that repatriation
means transporting the employee from the workplace to his or her home, that is, to enable the employee return home after
the termination of his employment.

m. More favourable contracts

The obligations stated here are derived from the Employment Act. The Act however protects and preserves contractual
provisions stipulating more favorable terms than those provided for in the Act. Such terms may be found in the employment

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Termination of the Employment Relationship in Uganda
Key Employer Obligations

contract, offer letter, the employer’s human resources manual and other employment documents.
4. Conclusion

The Employment Act 2006 creates several avenues for both the employer and employee to terminate the employment
contract. However, the process to terminate an employment contract should be carried strictly within the four corners of
the law. Termination of employment is unfair and not permitted by law if it is premised on the employee’s; pregnancy,
membership or participation in activities of a labour union, race, colour, sex, religion, political opinion or affiliation, national
extraction, nationality, social origin, marital status, HIV status or disability, commencement of legal proceedings against the
employer, or absence from work on reliable grounds including sickness. An employee is entitled to lodge a complaint of unfair
termination against the employer if the termination of their employment is based on any of the aforementioned grounds.
Particular attention should also be paid to the post-termination obligations to forestall avoidable labour related disputes and
claims.

Cristal Advocates accepts no responsibility for any loss occasioned to any person acting or refraining from acting as a result of material
contained in this publication. Further advice should be taken before relying on the contents of this publication.

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 Contacts for this Publication Termination of the Employment Relationship in Uganda
Key Employer Obligations
Francis leads the litigation and dispute resolution practice at the firm. He is an Advocate of the High Court of
Uganda with expertise in oil and gas, infrastructure and dispute resolution. He has been part of teams advising
on projects in Uganda, Tanzania, Mozambique and South Africa. He specializes in regulatory compliance,
national content, health and safety and dispute resolution.

He joined Cristal Advocates from Kizza, Tumwesige, and Ssemambo Advocates. He previously worked with the
Advocates Coalition for Development and Environment (ACODE). He also undertook a traineeship with the oil
and gas division of Webber Wetzel in Johannesburg, South Africa.

He holds a Master of Laws degree in Petroleum Law and Policy from the University of Dundee in the United
Francis Tumwesige Ateenyi Kingdom and various other qualifications. ■
ftumwesige@cristaladvocates.com
+256 702 540 936

Bill is a Senior Advisor with Cristal Advocates. He has concentrated on working with energy companies with
a particular focus on cross border transactions and M&A since 1989 and is a leading global energy and tax
practitioner with wide international experience. Between 1986 and 1998, he worked in London with the UK tax
authorities and Big Four accounting firms. From 1998 to 2004, he was based in Kazakhstan working across the
Caspian region with Deloitte. He was in the region at the time it was developing its infrastructure for crude oil
production with international investment following the collapse of the Soviet Union.
From 2004 to 2008, he worked in Russia where he led Deloitte’s oil and gas industry group and established
Deloitte’s office in Sakhalin. He moved to East Africa in 2009 leading Deloitte’s energy and resources industry
group in Uganda, Kenya, Tanzania, Rwanda, Ethiopia and Mozambique. He was initially based in Kampala,
Uganda later relocating to Dar es Salaam, Tanzania. Bill returned to the UK in 2014 supporting Deloitte UK
Bill Page teams working on outbound projects investing in Africa and was a key member of Deloitte UK‘s energy and
bpage@cristaladvocates.com resource practice until his retirement from the firm in September, 2018.

Bill is a graduate of Oxford University and completed his inspectors’ training with the UK Inland Revenue in
1989. ■

John leads the public policy and advocacy practice at the firm and combines unique public and private sector
experience.

Prior to joining Cristal Advocates, he had worked as a Private Secretary to the President of the Republic of
Uganda. During this time, he participated in several public and private sector engagements that included
advising and coordinating activities relating to oil and gas as well as infrastructural projects of national
significance. John had earlier worked with the Post Bank Uganda Limited and Shonubi Musoke and Co.
Advocates.

John Teira He holds a Bachelor of Laws degree from Makerere University and a Post Graduate Diploma in Legal Practice
jteira@cristaladvocates.com from the Law Development Centre and various other qualifications. ■
+256 704 493 997

Dickens leads the oil and gas practice at Cristal Advocates. He has an in depth appreciation of Uganda’s oil
and gas sector having served as the maiden Company Secretary of the Uganda National Oil Company (UNOC)
and the Uganda Refinery Holding Company Limited (URHC). UNOC represents the Government of Uganda
commercial interests in the oil and gas sector while URHC represents government interests in the refinery
project as well as managing the petrol based industrial park.
Dickens was instrumental in UNOC’s formation and initial period of operation and also served as its head of
Contracts, Negotiations and Advisory until May 2018. Prior to joining UNOC, Dickens was Legal Counsel at
the Petroleum Directorate of the Ministry of Energy playing key legal advisory roles on the negotiation and
implementation of PSAs, Joint venture and other oil and gas agreements. He was also part of the team that
shepherded the process of enacting the current Ugandan oil and gas Legislations and Regulations including the
Dickens Asiimwe Katta local content requirements.
dasiimwe@cristaladvocates.com
+256 772 370 021 He is a certified project control specialist (IFP) and holds a Master of Laws Degree in Petroleum Law and
Policy from the University of Dundee in the United Kingdom, a Post Graduate Diploma in Legal Practice and a
Bachelor of Laws degree from Makerere University. ■

Denis is the Managing Partner at Cristal Advocates where he also leads the energy and tax practice. He is
qualified both as a Lawyer and Chartered Accountant with vast experience serving various industries in Sub
Saharan Africa. Before joining Cristal Advocates, he had worked for close to 10 years with Deloitte and Touche
where he started his career and rose to senior managerial positions.

At Deloitte, he lived and worked in Uganda, Kenya, Tanzania and the United Kingdom for over 6 years and
subsequently became the firm’s chief of staff for the Energy and Resources Industry Group seeing him play a
lead advisory role in Uganda, Kenya, Tanzania, Mozambique, South Sudan, Somalia and Ethiopia.

Denis is widely published and a regular commentator in the local, regional and international media and speaker
at various forums regarding the taxation and financing of energy projects as well as the protection of large
Denis Yekoyasi Kakembo capital projects within the framework of international investment law.
dkakembo@cristaladvocates.com
He holds a Master of Laws degree in Petroleum Taxation and Finance from the University of Dundee in the
+256 751 834 168 Cristal Advocates 7
United Kingdom, a Post Graduate Diploma in Legal Practice and a Bachelor of Laws degree from Makerere
University. ■
Termination of the Employment Relationship in Uganda
Key Employer Obligations

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