What Severance Pay Rules Must Employers Follow in Trinidad & Tobago?

Which Employees Qualify for Severance Pay?

• Employees who are retrenched or made redundant, rather than dismissed for misconduct or poor performance.
• Employees with at least one year of continuous service with your company, as defined under the Retrenchment and Severance Benefits Act.
• Workers employed under a contract of service, including full-time and qualifying part-time staff, but excluding genuine independent contractors.
• Employees who are terminated because your business closes, downsizes, or reorganizes in a way that abolishes their role.
• Employees who are not offered suitable alternative employment on comparable terms within a reasonable period.
• Employees who do not fall within excluded categories under the Act, such as certain fixed-term contracts that naturally expire without early termination.

What Are the Legal Timelines for Paying Severance?

Under Trinidad & Tobago law, you must give advance written notice of retrenchment and pay severance as soon as reasonably practicable after the termination date, typically at the time the employee’s final wages are settled. The Retrenchment and Severance Benefits Act requires you to notify both the affected employees and the Minister of Labour within prescribed notice periods, especially where five or more workers are being retrenched. In practice, employers usually aim to pay severance on or shortly after the last working day to avoid disputes and interest claims. Any delay should be clearly documented, agreed where possible, and never used as leverage against the employee. If a dispute arises, the Industrial Court can order payment, interest, and other remedies for late or underpaid severance.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to comply with severance rules in Trinidad & Tobago, you risk financial awards in the Industrial Court, enforcement action, and reputational damage. Non-compliance can arise from not paying severance at all, miscalculating the amount, skipping mandatory consultation and notice steps, or targeting employees unfairly in a retrenchment exercise.

• The Industrial Court can order payment of outstanding severance plus interest.
• You may be required to pay additional compensation for unfair or harsh dismissal.
• The court can reinstate or re-engage employees in serious procedural breach cases.
• Government authorities may scrutinize your wider employment practices and records.
• Disputes can trigger union action, collective grievances, and long-running litigation costs.

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 Trinidad & Tobago’s severance rules, but it can shift day-to-day compliance tasks. In a typical EOR model, the EOR is the legal employer on paper and is responsible for calculating and paying any statutory severance owed. However, your company, as the client, usually bears the commercial cost of severance through your service agreement and can still be named in disputes about the real nature of the employment relationship. If you direct the employee’s work and decisions that lead to retrenchment, you may be scrutinized as a joint or associated employer. A well-drafted EOR contract should clearly allocate severance risk, funding, and dispute-handling responsibilities.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company stay aligned with Trinidad & Tobago’s Retrenchment and Severance Benefits Act by standardizing how you track service, pay, and notice periods. Our platform keeps clean records of start dates, contract types, salary history, and working patterns so severance calculations are based on accurate, up-to-date data. You get clear visibility into who qualifies for severance, what they are owed, and when it must be paid.

When you use Playroll as your global employment partner, we coordinate with local experts to apply statutory rules and any applicable collective agreements in Trinidad & Tobago. We help you plan workforce changes, structure compliant retrenchment processes, and document decisions to reduce the risk of Industrial Court disputes. Your team can focus on business strategy while we handle the operational and legal details of severance compliance.