What Severance Pay Rules Must Employers Follow in Cuba?

Which Employees Qualify for Severance Pay?

• Employees hired under indefinite-term contracts who are dismissed without legally justified cause.
• Fixed-term or project-based employees whose contracts are ended early without a valid legal reason.
• Employees who lose their position due to redundancy, restructuring, or elimination of their role under company reorganization.
• Employees who are not offered suitable alternative work when their position is abolished for economic or technological reasons.
• Employees with at least the minimum continuous service required by the Labour Code or applicable collective agreement for severance.
• Employees who do not fall under the limited categories where termination without severance is allowed, such as serious disciplinary breaches proven under due process.

What Are the Legal Timelines for Paying Severance?

In Cuba, severance is expected to be paid promptly once the employment relationship legally ends and the termination decision is formalized. In practice, your company should aim to pay severance together with the employee’s final wages and accrued benefits, usually within the same pay cycle. Collective agreements or internal policies may set more specific deadlines, which then become binding on you. Delays can trigger labour complaints, inspections, and potential penalties, so you should document the payment date and method. Where there is a dispute about the amount, it is safer to pay the undisputed portion immediately while the disagreement is resolved.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Cuba, you risk labour inspections, administrative fines, and orders to pay outstanding amounts with retroactive effect. Employees can file claims with labour authorities or labour courts, and non-compliance can escalate into broader scrutiny of your employment practices.

• You may be ordered to pay the full severance owed plus any unpaid wages and benefits.
• Labour inspectors can impose administrative fines for breaches of the Labour Code.
• Repeated or serious violations can lead to higher fines and tighter monitoring of your company.
• Courts or authorities may require reinstatement if a dismissal is found unlawful.
• Non-compliance can damage your reputation and complicate future hiring or licensing.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as the service described at https://www.playroll.com/employer-of-record does not remove the underlying Cuban legal requirements on severance. In most cases, the EOR is the formal employer in Cuba and is directly responsible for calculating and paying severance under the Labour Code. However, your company, as the client, typically bears the commercial and contractual risk if your instructions lead to an unlawful termination. Cuban authorities will look at who is recorded as the employer of the worker, but employees may also seek remedies against any entity they see as controlling their work. Your service agreement with the EOR should clearly allocate severance costs, decision-making authority, and responsibilities for handling disputes.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Cuba means balancing the Labour Code, collective agreements, and local practice, all while documenting fair and objective reasons for termination. Your company should maintain up-to-date employment contracts, clear disciplinary procedures, and written records of performance or restructuring decisions. This makes it easier to show just cause where it exists and to calculate severance correctly where it does not.

With Playroll, your team can outsource the complexity of Cuban employment compliance while keeping strategic control over your workforce. Playroll’s local expertise helps you classify employees correctly, apply the right severance formulas, and meet payment timelines that satisfy Cuban authorities. You stay focused on business decisions, while Playroll handles the paperwork, calculations, and on-the-ground coordination needed to keep terminations compliant and low-risk.