What Severance Pay Rules Must Employers Follow in Sao Tome & Principe?

Which Employees Qualify for Severance Pay?

• Employees dismissed without just cause or for economic, technological, or structural reasons, after completing the statutory minimum service period.
• Employees on open-ended contracts whose roles are made redundant and who are not offered suitable alternative work on comparable terms.
• Fixed-term employees whose contracts are terminated early by the employer without a legally valid reason recognized by the Labour Code.
• Employees who are dismissed for performance or conduct reasons that do not meet the strict legal standard for just cause under local law.
• Employees who are not covered by more favorable severance terms in a collective agreement, but still benefit from the minimum statutory protections.
• Employees who resign for employer breach (constructive dismissal) where the Labour Inspectorate or courts treat the situation as an unfair dismissal.

What Are the Legal Timelines for Paying Severance?

In Sao Tome & Principe, severance is generally due at the time the employment relationship ends, alongside final salary, accrued vacation pay, and any other outstanding entitlements. Your company should aim to calculate and pay severance on the employee’s last working day or within a very short period specified in the termination notice or settlement agreement. Where the Labour Code or a collective agreement sets a specific deadline, you must follow that shorter statutory or contractual timeframe. If there is a dispute about the amount, you should still pay the undisputed portion promptly and document your calculation. Keeping written proof of payment and signed receipts is essential in case of inspection or litigation.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Sao Tome & Principe, you risk administrative, financial, and judicial consequences. Labour authorities and courts can order back payments, apply fines, and in some cases treat the dismissal as unlawful, increasing your overall liability. Non-compliance can also damage your reputation with workers and regulators, making future inspections more challenging.

• Labour inspectors may impose administrative fines for non-payment or late payment of severance.
• Courts can order payment of outstanding severance plus interest and monetary compensation.
• An unlawful dismissal finding can lead to additional damages or, in some cases, reinstatement orders.
• Failure to document payments properly can shift the burden of proof against your company in disputes.
• Repeated violations can increase penalties and attract closer scrutiny from labour authorities.

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 Sao Tome & Principe’s severance rules. In most structures, the EOR is the legal employer on paper and is responsible for calculating and paying statutory severance locally. However, your company usually bears the commercial and financial risk under the service agreement, including funding any severance owed. If the arrangement is challenged and you are seen as the true employer, you could face direct liability alongside the EOR. Clear contracts, accurate instructions, and proper funding are key to ensuring severance is handled compliantly.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Sao Tome & Principe’s severance rules by combining local legal insight with practical payroll execution. Your team gets support on contract structuring, termination planning, and severance calculations that reflect the Labour Code, collective agreements, and market practice. We help you document just cause, redundancy processes, and notice periods so that any termination is defensible if questioned by authorities or courts.

When you use Playroll as your global employment partner, we coordinate with in-country experts to ensure severance is paid in the right amount, to the right people, at the right time. Our workflows include compliance checks, clear breakdowns of final pay, and auditable records for inspections or disputes. This lets your HR and finance teams manage workforce changes in Sao Tome & Principe with confidence, while reducing the risk of unexpected penalties or reinstatement orders.