What Severance Pay Rules Must Employers Follow in Zambia?

Which Employees Qualify for Severance Pay?

• Employees on indefinite or long-term fixed-term contracts who are terminated for operational reasons such as redundancy or restructuring.
• Employees whose contracts are terminated by the employer without a valid reason or without following fair procedure as required by the Employment Code Act.
• Employees who lose employment due to the employer’s insolvency, closure of business, or relocation that makes continued work unreasonable.
• Eligible dependants of an employee who dies in the course of employment where the law or contract provides for severance-type benefits.
• Employees whose fixed-term contracts are repeatedly renewed in a way that effectively creates continuous service and are then non-renewed for reasons unrelated to performance.
• Employees covered by collective agreements or company policies that promise severance or gratuity on termination beyond statutory minimums.

What Are the Legal Timelines for Paying Severance?

In Zambia, the Employment Code Act expects you to pay all terminal benefits, including any severance due, as soon as reasonably practicable after the termination date. In practice, many employers aim to settle within 14 days, and you should avoid going beyond the final payroll cycle for that employee. Your company should confirm any shorter timelines set in contracts, collective agreements, or internal policies and follow the most favourable rule for the employee. Where a dispute exists, you should still pay the undisputed portion promptly while the balance is resolved. Always document payment dates, methods, and calculations in writing and obtain signed acknowledgements from the employee.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Zambia, you risk both financial and regulatory consequences under the Employment Code Act. Non-compliance can trigger labour inspections, employee complaints, and orders to pay arrears with additional amounts. It can also expose your business to litigation and reputational damage that complicates future hiring and regulatory approvals.

• Labour officers may order you to pay outstanding severance plus any other terminal benefits due.
• Courts or tribunals can award additional compensation, interest, and legal costs to affected employees.
• Persistent or willful non-compliance can result in fines and, in serious cases, potential criminal liability for responsible officers.
• Your company may face enforcement actions such as attachment of assets or bank accounts to satisfy awards.
• Reputational harm can impact tenders, investor confidence, and your ability to attract skilled employees.

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 Zambia’s severance rules, but it can shift day-to-day liability management. In an EOR model, the EOR is the legal employer on record in Zambia and is responsible for calculating and paying any statutory severance due. Your company, as the client, still bears commercial and contractual responsibility under the service agreement, including funding those payments. If the EOR misapplies the Employment Code Act, authorities may first pursue the legal employer, but employees may also look to your business for redress. A well-drafted EOR contract should clearly allocate severance risk, funding, and decision-making on terminations.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Zambia means tracking contract types, reasons for termination, and length of service for every employee, then mapping those facts to the Employment Code Act and any enhanced company or collective benefits. Playroll helps your team standardise this process, so you know when severance is triggered, how to calculate it, and when to pay it. With local expertise, you can align your internal policies and templates with Zambian law while still meeting global HR standards.

Playroll’s platform centralises employment data, termination workflows, and approvals, reducing the risk of missed deadlines or miscalculations. When you hire through Playroll as an EOR, we handle statutory compliance, payslips, and severance administration on your behalf, while you stay focused on performance and business outcomes. This combination of local legal insight and operational support helps your company avoid penalties and maintain a compliant, fair offboarding experience in Zambia.