What Severance Pay Rules Must Employers Follow in Ghana?

Which Employees Qualify for Severance Pay?

• Employees made redundant due to restructuring, downsizing, or closure of the business.
• Employees who lose employment because the employer becomes insolvent or ceases operations.
• Employees terminated without just cause, where compensation may be awarded.
• Employees covered by a collective bargaining agreement that includes redundancy or severance provisions.

Employees dismissed for misconduct or those who resign voluntarily do not qualify for severance pay.

What Are the Legal Timelines for Paying Severance?

The Labour Act does not specify an exact number of days for paying severance. However, once redundancy or termination is approved by the Chief Labour Officer, employers are expected to make payment promptly, ideally upon termination or within the next payroll cycle. In redundancy cases, the employer must first notify both the affected employees and the Labour Department in writing, providing details of the reasons and the number of employees involved. Once the terms are agreed and approved, payment should be made without undue delay to avoid disputes or claims for unfair treatment.

What Penalties Apply if Severance Is Not Paid Correctly?

Failing to pay severance correctly in Ghana exposes employers to significant legal and financial risks. Non-compliance may result in:

• Orders from the Labour Commission requiring payment with interest.
• Fines or penalties under the Labour Act.
• Potential lawsuits or reinstatement orders in cases of wrongful termination.
• Damage to the company’s reputation and possible suspension of business permits in serious or repeated cases.

Ensuring timely and accurate severance payment helps employers avoid these penalties and maintain compliance with Ghana’s labor authorities.

Does Outsourcing Employment via an EOR Change Severance Liability?

Yes, using an Employer of Record (EOR) in Ghana typically shifts severance liability to the EOR. The EOR is the legal employer of record and therefore responsible for managing employment contracts, payroll, and statutory entitlements, including severance pay when applicable. The client company directs the employee’s day-to-day work but is not legally responsible for severance under Ghanaian law. This arrangement minimizes compliance risks for global employers by ensuring all termination and severance obligations are handled in line with local regulations.

Be 100% Compliant in Offering Severance with Playroll

Severance pay rules in Ghana can be complex, especially when redundancy, negotiation, or regulatory approval is involved. With Playroll, you never have to worry about missing a compliance step or miscalculating an employee’s entitlement. Our platform ensures every severance payment aligns with Ghana’s Labour Act, collective bargaining standards, and approval procedures.

Playroll handles all local employment obligations—from payroll to terminations—so you can focus on growing your business with confidence. We ensure accurate calculations, timely payments, and full compliance with Ghanaian employment law. Partner with Playroll to safeguard your global workforce and maintain compliance across every country you hire in.