What Severance Pay Rules Must Employers Follow in Honduras?

Which Employees Qualify for Severance Pay?

• Employees with an indefinite-term contract who are dismissed without just cause under the Honduran Labor Code.
• Employees whose fixed-term or task-based contracts are ended early by the employer without a legally valid reason.
• Employees who resign for employer fault that qualifies as constructive dismissal under Honduran law.
• Employees with at least three consecutive months of service, as this is the minimum tenure that typically triggers statutory severance.
• Employees who lose their jobs due to certain economic or organizational reasons where the employer cannot prove a just cause defense.
• Employees who are not excluded by special regimes (for example, some public servants or genuinely independent contractors).

What Are the Legal Timelines for Paying Severance?

In Honduras, severance should be paid as soon as the employment relationship ends, and in practice you are expected to settle all final amounts on the termination date or within a very short, reasonable period. The Labor Code requires prompt payment of all earned wages and benefits, and labor authorities treat severance as part of that final settlement. Delays can expose your company to claims for unpaid wages, interest, and potential penalties. To stay safe, aim to calculate and pay severance no later than a few business days after the last working day. Always document the payment with a signed receipt or settlement agreement from the employee.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Honduras, you risk labor inspections, employee claims, and additional financial exposure. Courts and the Ministry of Labor tend to interpret doubts in favor of the employee, so underpaying or delaying severance can become expensive quickly.

• Labor courts can order payment of all outstanding severance, accrued benefits, and any unpaid wages.
• You may be required to pay interest or monetary adjustments on late or underpaid amounts.
• Inspectors from the Ministry of Labor can impose administrative fines for non-compliance.
• Disputes can lead to reinstatement orders in some cases, especially where dismissal is found unjustified.
• Legal fees, negotiation costs, and reputational damage can rise quickly if multiple employees file claims.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record can shift day-to-day HR administration and local payroll compliance to a third party, but it does not eliminate the underlying Honduran severance rules. In most EOR structures, the EOR is the legal employer on paper and is responsible for calculating and paying severance according to the Labor Code. However, your company usually bears the economic cost through your service fees or a pass-through of termination expenses. If the EOR mishandles severance, employees and authorities may still look to both the EOR and your company, especially where joint liability or co-employment concepts apply. Clear contracts, transparent cost allocation, and documented termination instructions are essential to manage this risk.

Be 100 Percent Compliant in Offering Severance with Playroll

Honduran severance rules are technical, and mistakes often come from misclassifying contracts, miscounting years of service, or ignoring mandatory benefits that must be included in the severance base. Playroll helps your company navigate these details by pairing local legal insight with automated calculations, so you know which employees qualify, how much they are owed, and when payment must be made. Your team gets clear, audit-ready documentation for each termination, reducing the chance of disputes or surprises in a labor inspection.

With Playroll, you can also centralize your global offboarding process while staying aligned with Honduran law and practice. Our platform and experts help you plan terminations in advance, budget for severance costs, and coordinate compliant payments through local payroll channels. That means your managers can focus on business decisions, while Playroll handles the statutory details that keep your company fully compliant.