What Severance Pay Rules Must Employers Follow in Lesotho?

Which Employees Qualify for Severance Pay?

• Employees engaged under a contract of employment who have completed at least one year of continuous service with your company.
• Employees whose employment is terminated by the employer for reasons other than serious misconduct, such as redundancy or operational requirements.
• Employees who resign after long service where the Labour Code or case law recognizes entitlement, for example following constructive dismissal.
• Fixed-term employees whose contracts are not renewed where non-renewal is treated as termination and no valid objective reason is shown.
• Employees who are dismissed for reasons related to incapacity or poor performance, provided due process is followed and the dismissal is not for gross misconduct.
• Employees excluded from contributory pension or gratuity schemes that already provide at least equivalent terminal benefits for the same period of service.

What Are the Legal Timelines for Paying Severance?

In Lesotho, severance pay should be settled as soon as reasonably practicable after the termination date, and best practice is to pay it together with the employee’s final salary. Many employers target payment within the same pay cycle or within 7 to 14 days of the last working day to avoid disputes. Where termination is planned, such as redundancy, you should calculate severance in advance and confirm the amount in writing before the exit date. Any delay should be clearly documented, agreed where possible, and never extend beyond what could be viewed as a reasonable time by a labour inspector or court.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Lesotho, you risk statutory claims, inspections, and financial exposure. The Labour Code allows employees to bring disputes to the Directorate of Dispute Prevention and Resolution (DDPR), and non-compliance can lead to orders for back payment, interest, and sometimes additional compensation. Persistent or deliberate breaches can also damage your reputation with regulators and unions, making future workforce changes more difficult to manage.

• You may be ordered to pay outstanding severance plus interest for late payment.
• You can face awards of additional compensation for unfair dismissal where severance was mishandled.
• Labour inspectors may issue compliance directives and escalate persistent non-compliance.
• Legal costs and management time can increase significantly during DDPR or court proceedings.
• Reputational harm can affect future hiring, union relations, and government tenders.

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 comply with Lesotho’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 statutory severance in line with the Labour Code. However, your company usually funds these costs through service fees or pass-through charges, and you remain the decision-maker on terminations. If you instruct an unlawful or unfair dismissal, you can still face commercial and reputational consequences, even where the EOR is the formal respondent.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company stay on top of Lesotho’s severance obligations by standardizing how you collect data on start dates, salary history, and contract type. Our team tracks changes to the Labour Code and local practice, so your severance calculations reflect the latest rules on length of service, exclusions, and interaction with other benefits. You get clear breakdowns of what is statutory, what is contractual, and what is discretionary.

With Playroll, you can plan workforce changes with accurate cost estimates before you start consultation or notice periods. We coordinate with local experts to document terminations properly, align payment dates with legal expectations, and reduce the risk of DDPR disputes. Your HR and finance teams gain a repeatable, auditable process for severance, whether you employ directly in Lesotho or through an EOR structure.