What Severance Pay Rules Must Employers Follow in Dominica?

Which Employees Qualify for Severance Pay?

• Employees engaged under a contract of service who have completed at least one year of continuous employment with your company.
• Employees who are dismissed because of redundancy, including business closure, downsizing, or technological changes reducing the need for their role.
• Employees whose contracts are terminated without a valid reason recognized by law or without following fair procedure, where termination is treated as unjustified.
• Employees who are laid off for an extended period that is deemed a redundancy under the Protection of Employment Act.
• Employees who are not dismissed for serious misconduct or other grounds that forfeit entitlement to severance under the Act.
• Employees who have not already received a severance or redundancy payment for the same period of service from your company.

What Are the Legal Timelines for Paying Severance?

Dominica’s Protection of Employment Act requires that severance and other final payments be settled within a reasonable time after termination, and in practice you should aim to pay as soon as calculations are confirmed. Many employers target payment on or before the normal payday following the employee’s last working day, especially where redundancy is planned in advance. If there is a dispute about the amount, you should still pay any undisputed portion promptly while you resolve the balance. Written breakdowns of how severance was calculated help demonstrate good faith and reduce the risk of complaints to the Labour Commissioner. When large-scale redundancies are involved, plan cash flow early so you can meet all obligations without delay.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Dominica, you risk complaints to the Labour Commissioner, orders to pay arrears, and potential court action. Non-compliance can also damage your reputation with employees and unions, and make future restructuring more difficult to manage.

• You may be ordered to pay outstanding severance plus interest or other monetary remedies.
• You can face additional awards for unfair dismissal if the termination itself was not justified or properly handled.
• Persistent non-compliance can expose your company to prosecution and statutory fines.
• Disputes can consume management time and legal costs that far exceed the original severance bill.
• Labour authorities may scrutinize your future redundancy plans more closely if you develop a history of non-compliance.

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 Dominica’s severance rules, but it can shift who is the legal employer on paper. In most EOR arrangements, the EOR is responsible for administering terminations, calculating severance, and ensuring payments comply with the Protection of Employment Act. However, your company usually directs the decision to dismiss, so you can still face commercial or contractual consequences if you instruct an unlawful termination. You should align your service agreement with the EOR so it clearly allocates responsibility for severance calculations, funding, documentation, and handling disputes. This shared approach helps ensure employees are treated fairly while protecting your business from avoidable legal risk.

Be 100 Percent Compliant in Offering Severance with Playroll

With Playroll, your company gets a partner that understands Dominica’s Protection of Employment Act and how it applies in real-world terminations. We help you map out who qualifies for severance, how to calculate years of continuous service, and which earnings should be included in the severance base. Our team can also guide you on documenting redundancy reasons, consultation steps, and notice so that your decisions are both fair and defensible.

Playroll’s workflows are built to ensure severance is calculated accurately and paid on time, whether you are letting one person go or restructuring an entire team. We coordinate with your internal HR and finance teams, keep records aligned with local requirements, and support you if questions arise from employees or the Labour Department. That way, you can focus on running your business while staying fully compliant with Dominica’s severance rules.