<article><p>Termination of employment in Sri Lanka is governed by 2 principal statutes namely the Industrial Disputes Act No.43 of 1950, as amended (“IDA”) and the Termination of Employment of Workmen (Special Provisions) Act No.45 of 1971, as amended (“TEWA”). On a collective reading of these statutes, termination can only be effected in the following circumstances:</p><ol><li>With the employee’s consent (generally in the form of a resignation);</li><li>With the prior written approval of the Commissioner of Labour (“COL”);</li><li>For justifiable cause</li></ol><p>Where the COL gives approval for termination, the compensation payable for termination will be as per the formula set out in the Gazette setout in&nbsp;<b>Annexure A</b>&nbsp;hereto (“Termination Gazette”). The formula for computation of the quantum of compensation is as follows:</p><p>&nbsp;</p><table><thead><tr><th scope="col">No. of years of service completed at the date of termination</th><th scope="col">No. of months salary to be paid as compensation for each year of service</th><th scope="col">Maximum compensation</th></tr></thead><tbody><tr><td data-label="No. of years of service completed at the date of termination">1 to 5</td><td data-label="No. of months salary to be paid as compensation for each year of service">2.5</td><td style="margin: 0px; padding: 0.625em; border: 1px solid black; font: inherit; vertical-align: baseline; text-size-adjust: none; box-sizing: border-box; border-collapse: collapse; text-align: left;" data-label="&gt;Maximum compensation">12.5 months</td></tr><tr><td data-label="No. of years of service completed at the date of termination">6 to 14</td><td data-label="No. of months salary to be paid as compensation for each year of service">2</td><td style="margin: 0px; padding: 0.625em; border: 1px solid black; font: inherit; vertical-align: baseline; text-size-adjust: none; box-sizing: border-box; border-collapse: collapse; text-align: left;" data-label="&gt;Maximum compensation">30.5 months</td></tr><tr><td data-label="No. of years of service completed at the date of termination">15 to 19</td><td data-label="No. of months salary to be paid as compensation for each year of service">1.5</td><td style="margin: 0px; padding: 0.625em; border: 1px solid black; font: inherit; vertical-align: baseline; text-size-adjust: none; box-sizing: border-box; border-collapse: collapse; text-align: left;" data-label="&gt;Maximum compensation">38 months</td></tr><tr><td data-label="No. of years of service completed at the date of termination">20 to 24</td><td data-label="No. of months salary to be paid as compensation for each year of service">1</td><td style="margin: 0px; padding: 0.625em; border: 1px solid black; font: inherit; vertical-align: baseline; text-size-adjust: none; box-sizing: border-box; border-collapse: collapse; text-align: left;" data-label="&gt;Maximum compensation">43 months</td></tr><tr><td data-label="19 Amendment1">25 to 34</td><td data-label="19 Amendment">0.5</td><td data-label="20 Amendment (Bill)">48 months</td></tr></tbody></table><p>&nbsp;</p><p>The maximum compensation payable to an employee according to the above formula has been LKR 1.25 million. However,&nbsp;<b>the Cabinet of Ministers has approved the proposal presented by the Minister of Labour to increase this cap on compensation from 1.25 million to 2.5 million.</b></p><p><b>ANNEXURE A</b></p><p><img src="https://desaram.com/img/BlogDetail/cap-on-compensation-img1.jpg" alt="ANNEXURE A Cap on Compensation"><br><img src="https://desaram.com/img/BlogDetail/cap-on-compensation-img2.jpg" alt="ANNEXURE A Cap on Compensation"></p></article><p style="color: white;">Nadine Puvimanasinghe</p>