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Dismissing an Employee in Slovakia Costs Half What It Costs in Western Europe, but the Terms of Dismissal Are Stricter

Bratislava, 9 January 2013 – The costs of dismissing an employee in Slovakia, as in other post-communist countries in Central and Eastern Europe, are still on average fifty per cent lower than in the West, with the costs in Slovakia on average 2.3 – 2.7 times lower depending on income and the number of years worked. The most expensive dismissals have so far been in Italy, Belgium and Spain, ie in the countries where, because of growing unemployment, legislation is changing towards reducing the costs of dismissals and thereby making the labour market more flexible. These are the results of the latest study by the Deloitte Legal European network of law firms, which has been monitoring labour law conditions for dismissing employees in 25 European countries.

“Given the economic situation in the Eurozone, some countries have started to change their labour legislation in order to reduce costs of dismissals. ”

— Miroslava Terem Greštiaková,
attorney at Deloitte Legal

“Given the economic situation in the Eurozone, some countries have started to change their labour legislation in order to reduce costs of dismissals. Moreover, many European countries have not distinguished between the reasons for termination of employment until now. However, the current economic conditions made them reduce the amount of severance pay for dismissal for organisational reasons. Those countries include Spain and Sweden, for example,” says Miroslava Terem Greštiaková, attorney at Deloitte Legal, and she adds: 

“In terms of costs, dismissals are cheaper in Slovakia than in Western countries, but the terms of dismissal are stricter.”

According to the study, in approximately four out of five countries (81.5%) there is minimal difference in the costs of dismissal of an employee between the termination of employment for organisational reasons and for reasons on the side of the employee (health reasons, misconduct, unsatisfactory work results).

The exceptions are Bulgaria, Denmark, Poland, the Czech Republic and Slovakia, where the differences between the reasons for dismissal are considerable. Factors such as the severance pay that must be provided to the employee under certain conditions by law, as well as the costs of severance pay provided to the employee beyond the law in order to reach an agreement with the employer, were taken into consideration.

“Generally, the decisive factor with respect to the costs of a dismissed employee is mainly the duration of his employment relationship. Costs increase with a longer notice period, which differs in different jurisdictions,” explains Miroslava Terem Greštiaková.

“There are only a few countries in Europe that admit severance pay for the employee in the event of the termination of employment for reasons on the side of the employee. In some Western European countries, there is not even the legal right of an employee to obtain severance pay when he/she is dismissed for organisational reasons. High costs of dismissals of employees in these countries are caused mostly by long notice periods or by complicated employment and collective contracts, which require the assistance of lawyers,” adds Jan Procházka from Ambruz&Dark/Deloitte Legal in the Czech Republic.

Termination of an Employment Contract in the Slovak Republic

An employment relationship in the Slovak Republic may be terminated by: termination with a notice period, immediate termination of the employment relationship and termination of the employment relationship in the probation period. The conditions for dismissal by the employer are defined in a relatively-detailed manner in the Slovak legislation. As a result, an employee may be dismissed by a company only for the reasons defined in the Labour Code.

According to the study, the requirement of explaining the reasons of dismissal given by the employer exists in every analysed jurisdiction. Such requirement is defined differently in different national labour law systems; the terms of dismissal are defined in general terms or in more detail depending on the country. The study showed that the generally-defined explanation of the reason for dismissal prevails in the older Member States. 

“Contrarily, the detailed specification of the reasons for termination used in the Slovak Labour Code is not typical even for the legislations of most post-communist countries; it does not have any match in the European Union,” comments Miroslava Terem Greštiaková.  

The notice of termination must be in written form and it has to be delivered, and the employment relationship ends once the notice period expires. After the amendment to the Labour Code effective from 1 January 2013, the exact duration of the notice period is no longer defined, only its minimum duration. The duration differs depending on the length of the employment relationship. Generally, the notice period is defined at 1 month. For an employment relationship longer than 1 year and shorter than 5 years, the notice period is at least 2 months. For an employment relationship longer than 5 years, the notice period is at least 3 months.

However, statutory limitations apply to a termination notice given to an employee in a protection period, for example, during sick leave or pregnancy. In the above cases, the employer cannot dismiss the employee. Another limitation applies to the dismissal for redundancy of the employee, where the employer is not allowed to re-open the terminated position and recruit a new employee in this position for two months.

“The most frequent reason for dismissal on the side of employer is the redundancy of the employee; this applies to Slovakia, but also to the Czech Republic and other neighbouring countries,” comments Miroslava Terem Greštiaková. 

The most recent amendment to the Labour Code re-introduces the employer’s obligation to provide the employee with severance pay in certain cases of dismissal by termination notice. This obligation is tied to the statutory reasons for termination, particularly if the employer or its part is dissolved or relocated and the employee refuses to change the agreed place of work, if the employee becomes redundant or if the employee loses his/her long-term capacity to perform his/her current work due to his/her health condition.

Therefore, in the above cases, a notice period applies for an employee who is given a termination notice; such employee will also be entitled to severance pay. The amount of severance pay depends on the length of the employment relationship. The employee has the right to severance pay amounting to one monthly salary if his/her employment relationship has lasted more than two years. The employee obtains twice his average monthly earnings if he/she has worked from five to ten years for the employer. An employee whose employment relationship has lasted more than ten years but less than twenty years is entitled to three times his/her average monthly earnings. An employee whose employment relationship has lasted more than twenty years is entitled to four times his/her average monthly earnings.

However, pursuant to the amendment to the Labour Code, the different amounts of severance pay are linked to the termination of the employment relationship by agreement.

Overview of Termination Periods in Europe

In the event of the termination of employment, the termination period in Europe is mostly determined on the basis of the years worked of each particular employee. The shortest termination periods are in Latvia, Romania and Spain, where they do not exceed 1 month; the longest termination periods are in Scandinavia (Denmark, Norway, Finland and Sweden) where they can reach up to 6 months, which raises the costs of dismissal for the employer.

There is a specific approach to the determination of the termination period in the United Kingdom, where each year worked counts for one week of termination period. It can, however, reach a maximum of 12 weeks. Thus, if the employee has worked for the employer for less than one year, his termination period will lapse within one week, which makes it the shortest termination period in Europe.

Country Termination period in the event of dismissal from the employer Country Termination period in the event of dismissal from the employer

Azerbaijan

Termination period only in the event of reorganisation and in the event of a change of the working conditions (1 month or 2 months)

Netherlands

Based on the years worked, 1-4 months

Belgium

Differs (depending on the distinction between so-called white-collar and blue-collars employees)

Norway

Based on the years worked, 1-6 months

Bulgaria

1-3 months

Poland

Based on the years worked, 2 weeks – 3 months

Czech Republic

2 months

Austria

At least 6 weeks

Denmark

Based on the years worked, between 1-6 months

Romania

At least 20 working days

Finland

Based on the years worked, between 14 days - 6 months

Russia

2 months

France

Based on the years worked, between 1-2 months

Slovakia

Based on the years worked, 1-3 months

Croatia

Based on the years worked, between 2 weeks – 3 months; for employees who are older than 50 years and who have worked for their employer for longer than 20 years it is prolonged by two weeks; for employees older than 55 years it is prolonged by 1 month

Slovenia

Based on the years worked, 1-4 months

Italy

Differs depending on national collective agreements based on the years worked, profession and the reasons for dismissal

Spain

15 days

Lithuania

2-4 months

Switzerland

Based on the years worked, 1-3 months

Latvia

Between 10 days and 1 month

Sweden

Based on the years worked, 2 weeks – 6 months

Hungary

Based on the years worked, between 30-90 days

United Kingdom

1 week for each year worked, maximum of 12 weeks

Germany

Based on the years worked, between 4 weeks and 7 months

   

There is a specific possibility regarding dismissals in the Hungarian labour code that allows for an agreement between the employee and the employer where they can agree that the employment relationship will not be terminated by either side for one year. With respect to the fact that this novelty was introduced on 1 January 2012, it is still a question as to how frequently this legal exception will be used.

The Payment of Severance Pay

Regarding severance pay, the most generous labour codes are in Spain, Italy and Sweden. Until recently, every dismissed Spaniard had the right to severance pay amounting to 12 monthly salaries, whereas every Italian could expect almost one monthly salary for each year worked. In Sweden, an employee does not have a statutory right for severance pay; however, severance pay amounting to 6-15 monthly salaries is usually set in the employment contracts.

“With respect to the increasing unemployment in Spain and Italy, the governments of these countries have acceded to legislative changes of the labour market regulations. The labour code, which has for long favoured employees, is now adjusting more and more to the employers with the purpose of making the labour market more flexible and reducing the high unemployment. In Europe, and this is valid especially for the countries of Central and Eastern Europe, the amount of severance pay most frequently depends on the years worked and it ranges between 1-3 monthly salaries,” adds Jakub Hájek.

Besides Slovakia, similar rules exist in the Czech Republic and Poland. Latvians are somewhat better off as they can obtain one monthly salary more depending on the years worked. The Bulgarians obtain four months’ severance pay unless they commit a serious offence. Within the region of Central and Eastern Europe, the Lithuanians and Hungarians are better off as they can reach up to six monthly salaries if their employment relationship has lasted longer than 20 years.

In Hungary an employee has the right to severance pay only if he has worked for the company for at least three years. If the employer dismisses him within five years of his retirement, the employee obtains three monthly salaries more. The Slovenians are in the best situation of the post-communist countries as they obtain up to 10 monthly salaries depending on the years worked.

Surprisingly, the strictest labour codes from an employee point of view are in some western European and Scandinavian countries (Germany, the Netherlands, Belgium, Norway, Finland), where the employee has no legal right for severance payment. It is paid out only if it has been previously agreed in the employment or collective contract or in the notice of termination itself.

Labour Law Protection of Disabled Employees

The International Dismissal Survey also compares the conditions for the employment of disabled people in particular countries. Slovakia is one of the countries with stricter laws.  In countries such as Bulgaria, Croatia, Slovenia and Latvia, the employer cannot dismiss the disabled employee without the prior agreement of the labour office. In Western Europe, the disabled are protected in eg Austria, Germany, France and Sweden. In Russia, there is protection against dismissal for war invalids.

Labour Law Protection of Employees Older than 50 years

Older employees who are close to retirement age are under legal protection in some countries. For example, in Croatia the employer cannot terminate the employment relationship of an employee who is older than 60. If he terminates the employment relationship of an employee older than 50 who has been working for the employer for more than 20 years, the employee’s termination period is prolonged by 14 days. If the employee reaches the age of 55, his standard termination period is prolonged by 1 month.

Even greater protection for older employees exists in Poland where the employer cannot dismiss an employee in the period of 4 years prior to his retirement. On the other side, the employment relationship can be terminated immediately because of long illness and because of absence longer than one month even if this absence is justified. There is a preferential right of not being dismissed for Lithuanian employees who are less than 3 years from retirement.

Labour Law Protection of Women on Maternity and Parental Leave

In most of the monitored countries, the labour codes provide for protection against dismissal for women on maternity and parental leave. Women are usually protected during pregnancy, maternity leave and parental leave. In Latvia and Slovenia, the employer cannot dismiss women who are breastfeeding and this rule is binding for the whole period of breastfeeding. In Azerbaijan and Romania, the labour codes provide protection during the whole preschool age of the child.

Belgian Labour Law Specifics

From the employee’s perspective, the strictest labour code is probably in Belgium. Belgium is one of few countries where the labour law protection of employees is very small. Absolute power lies on the side of the employers, who are not obliged to reason their decisions on the dismissal of employees nor to take administrative steps that would lead to related costs for the employer. In spite of that, the country statistically belongs to the group of countries where the dismissal costs are the highest.

“This is so because Belgium is the only country in the EU where the law divides employees into two categories: employees that perform intellectual work (so called white-collar workers) and those who perform manual labour (so called blue-collar workers). If the company decides to dismiss a white-collar employee, the dismissal costs are of course higher than in the case of blue-collar workers, which is of course discriminatory. Nonetheless the dismissal costs are in total the second highest in Europe, after Italy, which is mainly because of the dismissal conditions set in the employment contracts,” says Nicolaas Vermandel, Partner in the Brussels Laga Legal Office, which is a part of the Deloitte Legal network.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/sk/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's approximately 195,000 professionals are committed to becoming the standard of excellence.

© 2013 Deloitte Slovakia

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