Severance Allowance in Mauritius: When and How Much

Severance allowance under the Workers’ Rights Act 2019 is principally a remedy ordered when a qualifying termination is unjustified; it is not an automatic payment whenever employment ends. For a worker with at least 12 months’ continuous employment, the statutory rate is three months’ remuneration for each completed year, with a proportional amount for additional months, when the Industrial Court or Redundancy Board makes the relevant finding.

When severance allowance becomes payable

Sections 69 and 70 of the Workers’ Rights Act 2019 tie severance to specified unlawful or unjustified employer termination and require at least 12 continuous months with the employer. The Industrial Court can order it where, for example, protected termination rules were breached, alleged misconduct or poor performance was not a valid ground, another good-faith course was available, or the termination was otherwise unjustified.

Expiry of a genuine fixed-term arrangement, resignation, retirement and employer dismissal are not interchangeable events. Section 69 contains express exclusions for some fixed-duration contracts, including the expiry of fixed contracts for migrant workers or non-citizens, and a special rule for certain higher-paid workers receiving length-of-service payments. Analyse the contract and actual reason for separation before applying the formula.

How the calculation works

Once entitlement at the section 70 rate is established, each 12 months of continuous employment attracts three months’ remuneration. An incomplete final year is calculated as one twelfth of that three-month amount for every additional month. Thus the calculation uses service in completed years and months; it should not silently round a part-year up or discard it.

“Month’s remuneration” is not necessarily the last basic salary. Section 70 selects the higher of the remuneration drawn for the last complete month or a monthly rate best calculated over the 12 months before termination, including extra work, productivity or attendance bonuses, commission for services and other regular payments. Payslips for the full year, commission schedules and proof of recurring payments can therefore change the calculation.

Increased severance for unjustified termination

The phrase “increased severance” can mislead because the current Act itself defines severance by the three-months-per-year remedy. A payroll offer labelled “one month per year”, an ex gratia payment or notice pay is not automatically statutory severance. The legal question is who made the payment, under which instrument, and whether an Industrial Court or Redundancy Board finding engages section 70.

Suppose a worker in a Phoenix warehouse is dismissed after eight years and five months, allegedly for poor performance. The useful first exercise is not to multiply the last basic salary by eight. Obtain the termination letter, charges, hearing record, appraisals and 12 months of payslips; determine whether the termination ground and procedure were valid; then calculate the potential remedy using the higher statutory remuneration basis and the five additional months.

Interaction with the Portable Retirement Gratuity Fund

The Portable Retirement Gratuity Fund is designed to preserve length-of-service value through employer contributions; it is not a second copy of severance. Section 71 permits specified employer-funded gratuity, pension or provident-fund amounts and PRGF contributions to be deducted from severance. In redundancy cases, sections 72 and 72A also expressly address deduction of PRGF contributions from severance ordered by the Board.

Check the worker’s payslips and PRGF information against the employer’s proposed deduction. A label such as “pension” does not prove that every rupee was an employer contribution within section 71, and employee-funded amounts should not be assumed to be deductible. The calculation should identify the gross section 70 amount, each proposed deduction and the statutory basis for it.

Deductions and set-offs employers try to apply

Section 71 lists gratuity granted by the employer, employer contributions to a qualifying pension or provident fund or scheme, and PRGF contributions. It does not create a general licence to subtract alleged poor performance, equipment value, customer loss, training cost or a disputed loan. Those assertions require their own legal and evidential basis.

Do not sign a “full and final settlement” only because the headline sum looks close to a severance estimate. Section 16 requires a compromise agreement to be vetted by a worker’s legal representative, trade union representative or Ministry representative. The document may also settle reinstatement, notice, leave, bonus, confidentiality or litigation rights, so its components should be itemised.

Claiming unpaid severance

Preserve the employment agreement, amendments, payslips, attendance and commission records, termination notice, disciplinary documents, PRGF evidence and every proposed settlement. Under section 69, the supervising officer of the Ministry responsible for labour enquires into a severance claim with a view to settlement and may institute Industrial Court proceedings if the officer considers the worker has a bona fide case.

Move promptly. A claim for reinstatement follows a different section and, unless the narrow statutory good cause is shown, must be registered within 15 days of termination; severance strategy should therefore be chosen rather than allowed to drift. A constructive-dismissal allegation also requires analysis of who legally ended the agreement, not merely the worker’s use of the word “resignation”.

Redundancy has its own institutional route. Employers within section 72 must negotiate with the recognised union, representative union or elected worker representatives and notify the Redundancy Board before the intended reduction. The fuller redundancy guide explains why a justified reduction can lead to notice indemnity, while an unjustified termination can engage reinstatement or section 70 severance.

Tax and payment timing

Tax treatment depends on whether the payment is statutory severance or another termination sum. The Mauritius Revenue Authority’s published guidance currently includes qualifying severance within an aggregate lump-sum exemption, rather than declaring every termination payment tax-free without limit. Ask the employer for the computation and classification, and verify the rule for the income year of payment.

Ordinary remuneration due on termination must be paid under section 31, but disputed statutory severance may follow Ministry enquiry, settlement or a court or Board order. There is no honest universal case duration. An uncontested computation can be resolved quickly; disagreement over the termination ground, witnesses, remuneration history or PRGF deductions may require adjudication. The distinction between probation and established service is discussed in the probation guide, while fee arrangements for representation are explained in the legal-cost guide.

This article is general legal information for Mauritius, not legal advice. For advice on your situation, consult a barrister.