What Severance Pay Rules Must Employers Follow in Uganda?

Which Employees Qualify for Severance Pay?

• Employees with at least six months of continuous service whose contracts are terminated by the employer, other than for serious misconduct.
• Employees declared redundant or laid off due to restructuring, closure, or reduced operations of your business.
• Employees whose employment ends because your company becomes insolvent or is placed under receivership or liquidation.
• Employees whose contracts are terminated unfairly or without following the lawful procedures under the Employment Act, 2006.
• Employees covered by collective bargaining agreements or written contracts that expressly provide for severance or redundancy pay.
• Employees who are not casual workers and who can show a pattern of regular, continuous work that amounts to ongoing employment.

What Are the Legal Timelines for Paying Severance?

Ugandan law requires you to settle all terminal benefits, including any severance pay due, within a reasonable time after termination, and Labour Officers expect this to be prompt. In practice, many employers aim to pay within the employee’s final payroll cycle or within 7 to 30 days of the last working day. Where a Labour Officer is involved in determining the amount, payment should follow immediately after the decision or signed settlement. Your company should document the payment date in the termination letter and keep proof of payment. Delays can trigger complaints to the Labour Officer and expose you to enforcement action or additional costs.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance where it is due, you risk statutory penalties, orders from Labour Officers, and reputational damage. Non-compliance can also escalate into labour disputes, inspections, and possible court proceedings, which are costly and time-consuming for your team.

• Labour Officers can order you to pay outstanding severance plus any other terminal benefits.
• You may face fines or prosecution for breaching the Employment Act, 2006.
• Disputes can lead to awards of additional compensation or interest by courts or labour tribunals.
• Your company may be subjected to more frequent inspections and closer regulatory scrutiny.
• Reputational harm can affect hiring, retention, and relationships with unions and regulators.

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 Uganda’s severance rules, but it can shift day-to-day liability. In an EOR model, the EOR is the legal employer on record in Uganda and is responsible for calculating and paying any severance due under local law. However, your company typically funds these costs through service fees or pass-through charges, so you still bear the economic impact. You should ensure your EOR contract clearly allocates responsibility for terminations, approvals, and dispute handling. Always confirm that the EOR’s policies align with the Employment Act, 2006 and any applicable collective agreements.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company stay aligned with Ugandan severance rules by standardising contracts, termination workflows, and documentation. Our team tracks updates to the Employment Act, 2006 and local practice, so your severance decisions reflect current law and realistic market norms. You get clear guidance on when severance is likely to be due, how it may be calculated, and what evidence you should keep in case of a Labour Officer review.

When you hire in Uganda through Playroll’s global platform or EOR service, we handle local payroll, statutory contributions, and termination settlements end to end. Your managers stay focused on performance and workforce planning, while we manage notice periods, final pay, and severance calculations in line with Ugandan requirements. This reduces the risk of disputes, missed deadlines, and unexpected liabilities when roles change or need to be closed.