Severance pay is a monetary compensation that an employer pays to an employee upon termination of the employment relationship under certain conditions. In the Federation of Bosnia and Herzegovina, the right to severance pay is regulated by the Labour Law of FBiH, with additional provisions found in employment rulebooks.
An employee who has concluded an open-ended employment contract with an employer and whose contract is terminated by the employer after at least two years of continuous employment is entitled to severance pay, except if the termination is due to the employee’s violation of work obligations or failure to fulfill contractual duties. The amount of severance pay depends on the length of uninterrupted prior employment with that employer.
How is the severance pay amount calculated?
The law prescribes a minimum amount of severance pay, which cannot be less than one-third of the average net salary paid to the employee in the last three months, for each full year of service with that employer.
What is the procedure for severance pay payment?
- The employer issues a decision to terminate the employment contract, stating the reasons.
- The employee is notified in writing, and the notice must indicate the right to severance pay.
- The amount of severance pay is specified in the calculation and must be paid no later than the day the employment ends.
- In case of dispute, the employee can initiate a labor dispute before the competent court.
Severance pay in FBiH is a statutory right for employees in cases where termination occurs through no fault of their own. Although the basic rules are set out in the Labour Law, each case has its specifics—especially when collective agreements apply or disputes arise.
If you have been terminated and are unsure whether you are entitled to severance pay, it is advisable to seek timely legal advice to protect your rights.
