Severance allowance and terminal benefits in Uganda
In brief
Severance allowance is payable where an employee has been in continuous service for six months or more and the employment ends in a qualifying way under the Employment Act, Cap. 226 (2023 Revision), s.86 — including unfair dismissal, death in service, termination for physical incapacity, or the employer's death or insolvency. It is not payable on a justified summary dismissal, or where the employee unreasonably refuses re-employment or absconds (s.87). The Act fixes no formula: the amount is negotiable between the employer and the employee or their union (s.88), and any gratuity or bonus already paid is set off (s.89).
1. Governing law
Section 86 of the Employment Act, Cap. 226 (2023 Revision) makes severance allowance due where an employee has been in continuous service for six months or more and one of the listed situations applies: the employee is unfairly dismissed; dies in service otherwise than through their own serious and wilful misconduct; terminates the contract because of physical incapacity not so occasioned; the contract is terminated by the employer's death or insolvency; or the contract is terminated by a labour officer for the employer's failure to pay wages. Section 87 excludes severance where the employee is summarily dismissed with justification, unreasonably refuses an offer of re-employment on no less favourable terms, or abandons or absconds from work for more than three days without explanation. Critically, the Act prescribes no fixed rate: the calculation of severance pay is negotiable between the employer and the workers or the union that represents them (s.88). Any gratuity, bonus or other end-of-service payment is taken into account and deducted from the severance allowance, though the right is otherwise additional to the employee's other rights (s.89). Statutory text verified against the consolidated Laws of Uganda as at 31 December 2023. Sourced from the Uganda Legal Information Institute (ulii.org).
2. Key statutes & rules
- Employment Act, Cap. 226 (2023 Revision) — s.86 (when severance allowance is due: six months' continuous service plus a qualifying termination, including unfair dismissal, death in service, physical incapacity, employer death or insolvency); s.87 (no severance on justified summary dismissal, unreasonable refusal of re-employment, or absconding); s.88 (amount is negotiable — no statutory formula); s.89 (gratuity/bonus set off; otherwise additional to other rights).
3. Practical guidance
Check the two gates: at least six months' continuous service and a qualifying termination under s.86.
Rule out the disqualifiers — a justified summary dismissal, unreasonable refusal of re-employment, or absconding defeat the claim (s.87).
Negotiate the amount: the Act sets no formula, so it is agreed between employer and employee or the union (s.88) — propose a figure benchmarked to length of service and sector practice.
Account for set-off: any gratuity or bonus already paid is deducted (s.89).
If agreement fails or payment is withheld, complain to a labour officer (s.92).
This note is a practitioner orientation, not legal advice, and does not create an advocate–client relationship. Ugandan law changes and chapter and section numbers were revised in the 2023 Laws of Uganda. Verify every statute, rule and authority against the current primary source — and the specific facts of your matter — before filing or relying on it.