What Severance Pay Rules Must Employers Follow in Cape Verde?

Which Employees Qualify for Severance Pay?

• Employees dismissed without just cause, including terminations for business, economic, or technological reasons, usually qualify for statutory severance.
• Employees on open-ended (indefinite) contracts who are terminated by the employer, other than for serious misconduct, are the primary group entitled to severance.
• Fixed-term employees may qualify if the contract is ended early by the employer without just cause or if the law or contract grants an end-of-contract allowance.
• Employees who have completed any applicable minimum service period set by law or collective agreement are more likely to qualify for severance.
• Employees who are not on probation and who have complied with their contractual duties typically retain their right to severance on lawful dismissal.
• Employees covered by collective bargaining agreements may have enhanced severance rights beyond the Labour Code’s minimum standards.

What Are the Legal Timelines for Paying Severance?

In Cape Verde, severance should be paid at the time the employment relationship ends, or as soon as reasonably possible thereafter, together with final salary and accrued benefits. Your company should aim to calculate and pay severance on the employee’s last working day or within a short, clearly documented period set in the termination letter. Collective agreements or company policies may impose stricter deadlines, which you must follow if they are more favorable to the employee. To stay safe, treat severance as part of the final settlement and avoid spreading payments over multiple months unless the law or a written agreement clearly allows it. Always provide a written breakdown of how you calculated the severance amount and obtain written acknowledgment of receipt from the employee.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Cape Verde, you risk financial, administrative, and reputational consequences. Labour inspectors and courts can intervene where employees challenge dismissals or underpayments. Non-compliance can also trigger back-pay awards, interest, and potential reinstatement orders, especially where the dismissal itself is found unlawful. You should document every termination carefully and keep proof of payments to reduce exposure in audits or disputes.

• Courts can order payment of outstanding severance plus interest.
• You may face additional compensation if the dismissal is ruled unfair or abusive.
• Labour authorities can impose administrative fines for breaches of the Labour Code.
• Reputational damage and strained union or employee relations can follow non-compliance.
• Legal and advisory costs typically increase significantly when disputes escalate to litigation.

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 Cape Verde’s severance rules, but it can shift day-to-day compliance tasks. In an EOR model, the EOR is the legal employer on paper and is responsible for calculating and paying severance in line with the Labour Code and any local practices. However, your company, as the client, usually bears the economic cost of severance and may still be named in disputes if it directed the termination decision. You should ensure your EOR contract clearly allocates responsibility for legal compliance, documentation, and dispute handling. Regularly review how your EOR manages dismissals so that your global policies and local Cape Verdean law stay aligned.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Cape Verde’s severance rules by combining local legal insight with structured processes. Our team tracks changes to the Labour Code, common court interpretations, and collective agreements so that your severance calculations reflect current law, not outdated assumptions. We guide you on which employees qualify, what documentation is needed, and how to structure termination notices to reduce the risk of claims.

Beyond pure calculation, Playroll builds severance into a broader offboarding workflow, from final-pay timelines to compliant settlement letters. Whether you employ directly or through an Employer of Record partner, we help you model different exit scenarios, estimate costs, and prepare clean, auditable records. That way, your team can make business decisions confidently while staying fully aligned with Cape Verde’s employment standards.