What Severance Pay Rules Must Employers Follow in Mozambique?

Which Employees Qualify for Severance Pay?

• Employees dismissed for economic, technological, or structural reasons generally qualify for severance, provided legal procedures are followed.
• Employees terminated without just cause or due to unlawful disciplinary dismissal are typically entitled to severance or compensation.
• Fixed-term employees may qualify if the contract is ended early by the employer without a valid legal reason.
• Indefinite-term employees who have completed their probation period usually qualify when dismissed for reasons not attributable to serious misconduct.
• Employees affected by collective redundancies or restructuring measures are entitled to severance if authorities’ procedures and consultations are met.
• Employees who resign for employer breach (constructive dismissal) may be treated similarly to unfairly dismissed employees for compensation purposes.

What Are the Legal Timelines for Paying Severance?

Mozambique’s Labour Law requires you to settle all outstanding employment entitlements, including any severance due, at the time the employment relationship ends or within a very short, reasonable period specified in the termination documentation. In practice, employers aim to pay severance on the employee’s final working day or within a few days of issuing the termination letter. Any delay can be treated as late payment of wages, which may trigger interest, penalties, or disputes before the labour authorities or courts. To stay safe, your company should document the calculation, obtain written acknowledgment of receipt, and process payment via traceable bank transfer. Align internal payroll cutoffs so that severance is never pushed to a later pay cycle without the employee’s written agreement.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Mozambique, you risk financial, administrative, and reputational consequences. Labour inspectors and courts can order back payments, apply fines, and in some cases treat the dismissal as unlawful, increasing what you owe. Non-compliance can also complicate future workforce changes and licensing or inspection processes. Keeping clear records and following statutory procedures is essential to avoid escalation.

• Administrative fines may be imposed by labour authorities for breaches of the Labour Law.
• Courts can order payment of outstanding severance plus interest and monetary compensation.
• An unlawful dismissal finding can lead to reinstatement or higher damages instead of standard severance.
• Repeated non-compliance can trigger closer inspections and damage your company’s standing with regulators.
• Disputes can consume management time and harm your employer brand in a relatively small labour market.

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 can shift day-to-day HR administration, but it does not remove the need to comply with Mozambique’s severance rules. In most EOR models, the EOR is the legal employer on paper and is responsible for calculating and paying severance under local law. However, your company usually bears the economic risk through the commercial agreement, meaning any severance, penalties, or dispute costs are recharged to you. If the EOR mishandles a termination, your brand and working relationship with the employee can still be affected. You should therefore ensure your EOR has strong Mozambique expertise, clear allocation of liabilities, and transparent severance-calculation methods.

Be 100 Percent Compliant in Offering Severance with Playroll

Working with a global partner like Playroll helps your company navigate Mozambique’s severance rules without turning your HR team into local-law experts. Playroll’s in-country specialists track updates to the Labour Law, typical severance practices, and documentation standards, so your terminations are structured and defensible. You get clear cost estimates before you act, including projected severance, notice, and unused leave, which makes workforce planning more predictable.

Playroll can operate as your Employer of Record or support your existing Mozambican entity with compliant payroll and offboarding processes. From drafting locally compliant termination letters to coordinating final payments and employee sign-offs, Playroll keeps each step aligned with Mozambican requirements. That way, your managers can focus on business decisions while knowing severance has been calculated, paid, and recorded correctly every time.