Employees who have been working for at least 104 weeks for the same employer and their employment is terminated due to redundancy, before the attainment of the pensionable age, are entitled to a redundancy payment out of the Redundancy Fund.

It is noted that in the case of a port worker, employment by more than one employers is deemed to be employment with the same employer.

It is also pointed out that seasonal employment with the same employer for at least 15 weeks on average over the period of such employment, is deemed to be continuous.

An employee is redundant when his employment is terminated for any of the following reasons:

  1. Because the employer has ceased or intends to cease to carry on the business in which the employee was employed.
  2. Because the employer ceases or intends to cease to carry on business in the place in which the employee was employed.
  3. Because of any of the following other reasons concerned with the operation of the business:
  • Modernization, mechanization, or any other change in the methods of production or organization, which reduces the number of employees necessary;
  • Changes in products or production methods or in the skills needed on the part of the employees;
  • Closing of departments;
  • Marketing or credit difficulties;
  • Lack of orders or raw materials;
  • Scarcity of means of production;
  • Contraction of the volume of work or business.

An employee is not entitled to redundancy payment, even if he has been declared redundant, where,

  • The employer, before terminating the employment, makes an offer of suitable alternative employment and the employee unreasonably refuses this offer.
  • The employment has been terminated as a result of the transfer of the business to another employer, who has renewed the contract of employment.
  • The employer is a registered company under the Companies Law and the employee is transferred to a suitable post in another company associated with the former company. Two companies are treated as associated companies, if one of them is a subsidiary of the other or, if both of them are subsidiaries of a third company. The term ‘subsidiary’ has the meaning assigned to it by section 148 of the Companies Law (Cap.113 as amended).
  • Before the termination of employment another employer, who is company in which the employer is the main shareholder or exercises substantial control, offers the employee suitable employment.

The amount of redundancy payment is calculated taking into account the period of the employee’s continuous service and his final wages, as follows:

Period of continuous employmentAmount of redundancy payment
Up to 4 years2 weeks wages for each year of continuous employment
More than 4 and up to 10 years2,5 weeks wages for each period of continuous employment
More than 10 and up to 15 years3 weeks wages for each year of continuous employment
More than 15 and up to 20 years3,5 weeks wages for each year of continuous employment
More than 20 and up to 25 years4 weeks wages for each year of continuous employment
 
  • Where the claimant is a shareholder of a private company and is employed by this company otherwise than under a contract of employment or under such circumstances from which an employer employee relationship may be derived, the redundancy payment is equal to one percent (1%) of his weekly wage multiplied by 52 and by the number of years of employment.
  • Where the total period of employment exceeds a number of complete years, any fraction of the year of 26 weeks or more is deemed to be a complete year.
  • Where the redundant employee has attained the age of 64 years, the redundancy payment is reduced by 1/12 for each completed month by which the age of the employee exceeds 64 years.

 

Where the employee is entitled at the same time to redundancy payment both out of the Redundancy Fund and from his employer by custom, law, collective agreement or contract, the employee receives the amount payable out of the Redundancy Fund and from his employer any amount by which the payment due by him exceeds the payment out of the Fund.
It is clarified that payment out of the Redundancy Fund is not considered as payment by the employer.

The period of employment is calculated in weeks. The following weeks count in computing the period of employment:

  1. A week in which the employee has worked 18 hours or more.
  2. A week in which the employee was:
  • Unable to work because of sickness, injury or pregnancy,
  • Absent from work because of temporary cessation of work,
  • Absent from work in circumstances such as, by arrangement, custom or law, the employer - employee relationship is considered by the Labour Disputes Court continued.
  • Absent from because of parental leave.

For the purposes of calculating the period of employment of seasonal workers only weeks of actual work are taken into account.
As a general rule only periods of employment with the employer who terminates the employee’s employment are taken into account. However, when the business is transferred from one employer to another or where the employee is transferred from one company to another associated company, or to a company essentially controlled by the same persons as the transferor company, account is taken of the employee’s employment with all such employers.

An exception to the above mentioned general rule are the cases covered by the special provisions enacted for the purpose of better protection of the employees, who had lost their jobs as a result of the circumstances created by the Turkish invasion. According to these special provisions and under certain conditions, for the purposes of redundancy payment account is taken of the period from 15 July 1974 to 3 October 1976, as well as of the period of the employee’s service with the employer by whom he was employed on 14 July 1974. In no case account is taken of any period of employment before 1 January 1964.

The period of employment taken into account in calculating payment must not only be employment with the same employer, but it must also be continuous. The continuity of employment is deemed not to have been broken by any of the following:

  • Absence from work due to service in the National Guard
  • Absence from work due to a trade dispute.
  • Absence from work because of temporary cessation of work.
  • Absence from work because of sickness, injury, maternity or disease.
  • Change of employer because of transfer of a business or part of a business from one employer to another.
  • Absence from work on leave with or without pay.
  • Absence from work due to force majeure, act of war, political rising or act of God.
  • Absence from work because of employment abroad in a business belonging wholly or mainly to the same employer.
  • Absence from work in circumstances such as by arrangement, custom or law the employer-employee relationship is considered by the Labour Disputes Court to continue.
  • Absence from work due to parental leave.

For the purposes of calculating the amount of payment where the employee works for a fixed wage, account is taken of his last wage before the termination of his employment.
Where the employee does not work for a fixed wage, but is paid by another method e.g. commissions or on the basis of the amount of his work, then account is taken of his average earnings during the last 12 weeks before the termination of his employment.

For the purposes of redundancy payment, the part of wages in excess of four times the amount of the basic insurable earnings, as fixed under the Social Insurance Law, is not taken into account.

All redundancy payments are made out of the Redundancy Fund. The Redundancy Fund is financed solely by contributions from employers. The amount of contribution is 1,2% of the employee’s earnings, subject to a ceiling fixed every year. For 2008 this ceiling was fixed at €3.836 per month. ‘Earnings’ includes the basic salary/wage, the cost of living allowance, commissions, 13th or 14th month’s salary, 53rd to 56th week’s wages, overtime compensation, shift allowances, service charge, the employer’s contributions to the Annual Leave with Pay Fund and to the trade unions holidays funds.

For the purposes of calculating contributions account is taken of the gross earnings, that are before any deduction for taxes, contributions or other purpose.
The employers’ contributions to the Redundancy Fund are paid together with the Social Insurance contributions.

For the purposes of compensation for unlawful dismissal, the employee must submit an application on the prescribed form to the Labour Disputes Court, within 12 months at the latest from the date of dismissal or within 9 months from the date of receipt of the notice of rejection of his claim by the Redundancy Fund.

In order to receive payment out of the Redundancy Fund, the employee must make a claim on the prescribed form, which he can obtain from the nearest Social Insurance Office, Citizen’s Service Centre or through the internet. The claim must be submitted to the nearest Social Insurance Office, within three months at latest from the date of termination of the employment. However, in exceptional cases, where the employee shows that he had a good reason for the delay, payment may be approved provided that the claim is made within 12 months from the date of termination of his employment.

The redundancy payment is made by cheque, mailed to the payee’s address. The cheque must be cashed within six months from the date of issue. However, in exceptional cases where the payee shows that he had a good reason for the delay, the said time may be extended for an additional period of six months. The right to the payment is any case lost, if the cheque is not cashed within 12 months from the date of issue.

An employer who intends to declare redundancies, is obliged to give at least one month’s notice to the Minister of Labour and Social Insurance, informing him of the number redundant employees, the branch or branches of the business affected, the name, occupation and family responsibilities of each employee to be affected and the reasons for the redundancy.

Where an employer, who has declared employees redundant, wishes, within eight months of the redundancy, to increase again his workforce, he must give priority in engagement to the employees affected by the redundancy, subject to the operational needs of his business.

Any person, who makes a false claim for redundancy payment or produces any false certificate or provide any false information in relation to such claim, is guilty of an offense and is liable, on conviction, to a fine not exceeding €770 (£450) or to imprisonment for a term not exceeding six months or to both such fine and imprisonment. The above-mentioned penalties apply also in the case of any person who assists another person to commit the respective offenses.

The Labour Disputes Court has jurisdiction to decide on disputes arising out of the application of the Termination of Employment Law. The Court consists of a Chairman, who is a lawyer, appointed by the Supreme Court Council, and two members representing the organizations of the employers and of the employees, respectively. The members are nominated in each case by the Chairman of the Court, from a panel prepared by the Minister of Labour and Social Insurance, after consultation with the employers’ and employees’ organizations.