What Severance Pay Rules Must Employers Follow in Albania?

Which Employees Qualify for Severance Pay?

• Employees dismissed for economic, technological, or organizational reasons after completing at least one year of continuous service with your company.
• Employees whose dismissal is found to be unjustified or unlawful by a court or labor inspectorate, triggering compensation that can function like severance.
• Employees on open-ended contracts who are terminated without valid cause or without proper procedure, where damages are calculated with reference to tenure and pay.
• Employees covered by collective bargaining agreements that expressly provide for severance or redundancy packages beyond the Labour Code minimums.
• Employees whose individual employment contracts or company policies promise severance or redundancy pay on termination without serious misconduct.
• Employees who agree to a mutual termination where you negotiate a severance package to reduce litigation risk or secure a smooth exit.

What Are the Legal Timelines for Paying Severance?

In Albania, the Labour Code requires you to settle all outstanding employment-related payments, including any severance or court-ordered compensation, promptly at the end of the employment relationship. In practice, this means paying severance on or before the final working day, or within the same payroll cycle in which the contract ends. If a court later orders compensation in lieu of reinstatement, you must pay within the deadline set in the judgment or enforcement notice. Delays can trigger default interest, enforcement actions, and reputational issues with authorities. To stay safe, build internal rules that severance is calculated, documented, and paid no later than the regular payday following termination.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance or court-ordered compensation correctly in Albania, you risk both financial and regulatory consequences. The State Labour Inspectorate can investigate complaints, impose administrative fines, and order you to correct underpayments. Courts can also award damages, interest, and legal costs if an employee challenges the termination.

• Administrative fines may be imposed by the labour inspectorate for non-compliance with Labour Code obligations.
• Courts can order back pay, severance-type compensation, and interest for late payment.
• You may be required to reinstate the employee or pay higher damages if the dismissal is found unlawful.
• Persistent non-compliance can increase scrutiny of your company and trigger more frequent inspections.
• Disputes over severance can damage your employer brand and complicate future hiring and terminations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the need to follow Albanian severance rules, but it can shift day-to-day compliance work. In an EOR model, the EOR is the legal employer in Albania and is responsible for applying the Labour Code, calculating any severance-type payments, and issuing final settlements. However, your company usually defines the business reasons for termination and may be contractually required to fund all severance and related costs. Albanian authorities will primarily look to the legal employer, but employees may still see your company as the decision-maker. A well-drafted EOR agreement should clearly allocate severance risk, decision-making, and funding responsibilities.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Albania means juggling Labour Code rules, court practice, and any contractual or collective commitments your company has made. Playroll helps you translate those rules into clear, repeatable processes so your managers know when severance is likely owed, how to calculate it, and how to document the termination. That reduces the risk of surprise claims, inspectorate findings, or court disputes months after an employee leaves.

With Playroll, you can centralize Albanian employment data, termination workflows, and approvals in one place, whether you hire directly or via an EOR partner. Our team tracks legal updates, typical market severance ranges, and enforcement trends, then bakes that into your templates and checklists. Your HR and finance teams get predictable costs, your local employees get fair treatment, and your company stays aligned with Albanian labour authorities.