What Severance Pay Rules Must Employers Follow in Bahamas?

Which Employees Qualify for Severance Pay?

• Employees with at least 12 months of continuous service who are dismissed for redundancy under the Employment Act, 2001.
• Employees whose fixed-term contracts are ended early without a valid contractual or statutory reason and without proper notice.
• Employees who are unfairly dismissed and receive compensation in lieu of reinstatement or re-engagement ordered by the Industrial Tribunal.
• Non-probationary employees terminated without the required statutory or contractual notice, where pay in lieu of notice is owed.
• Employees affected by business closure, downsizing, or technological change that results in genuine redundancy.
• Unionised employees where a collective agreement provides more generous severance or redundancy benefits than the statutory minimum.

What Are the Legal Timelines for Paying Severance?

In The Bahamas, the Employment Act, 2001 requires you to pay all outstanding wages, accrued vacation pay, notice pay, and any redundancy or severance entitlements within a reasonable time after termination. In practice, employers aim to settle these amounts on the final working day or within the next regular payroll cycle. Where redundancy is involved, you should confirm the calculation in writing and pay promptly once the termination takes effect. Delays can increase the risk of complaints to the Department of Labour or claims before the Industrial Tribunal. To stay safe, build internal processes that trigger severance calculations as soon as termination decisions are made.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance or redundancy entitlements correctly in The Bahamas, you risk statutory claims, orders from the Industrial Tribunal, and reputational damage. The Tribunal can award unpaid amounts plus additional compensation, and non-compliance with its orders can escalate into enforcement action. Disputes may also trigger inspections or intervention by the Department of Labour, especially in collective redundancies.

• Employees can file complaints with the Department of Labour and bring claims before the Industrial Tribunal.
• The Industrial Tribunal may order payment of all outstanding severance, redundancy, and notice pay.
• Additional compensation can be awarded for unfair dismissal or wrongful termination.
• Legal costs, interest, and administrative time can increase the overall cost of non-compliance.
• Persistent breaches can damage your company’s reputation with regulators, unions, and future hires.

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 Bahamian severance rules, but it can shift day-to-day compliance work to a specialist. In most EOR structures, the EOR is the legal employer on paper, responsible for issuing contracts, managing terminations, and calculating statutory redundancy or notice pay. However, your company usually directs the employee’s work and may be treated as the de facto employer for certain disputes. If an employee challenges a termination, both your business and the EOR could be scrutinised to ensure severance and notice rules were followed. A well-drafted EOR agreement should clearly allocate financial responsibility for severance and any Tribunal awards.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Bahamian severance rules by standardising how you collect data, calculate entitlements, and document termination decisions. Our workflows prompt you to confirm length of service, reason for termination, and applicable notice so that redundancy or severance amounts are aligned with the Employment Act, 2001 and any collective agreements. We also help you schedule payments to match your payroll cycle while still meeting the expectation of prompt settlement.

Beyond calculations, Playroll supports you in reducing dispute risk by generating clear termination letters, pay summaries, and audit-ready records. When you hire through our EOR solution, we take on the heavy lifting of local compliance, from contract setup to exit payments. That lets your team focus on business decisions while we help ensure that every Bahamian termination is handled fairly, consistently, and in line with local law.