The axe is being sharpened, or liberally swung, in financial centres across the globe, but if it’s hanging over your head, you might ask yourself where in the world is the worst place to lose your job? The answer, according to our research, is the US, swiftly followed by Switzerland.
Both countries have redundancy, or layoff, laws in place that favour the employer and make it easy for them to cut staff without the need for generous (or any) severance payments. In every state in the US (bar Montana) employment is considered “at will,” meaning that an employer can dismiss workers at any time, for any reason – as long as it’s not discriminatory – and are not legally required to shell out any compensatory pay.
In Switzerland, meanwhile, there’s no statutory redundancy payment (even if a parachute payment is usually negotiated with a trade union or employee group) and only workers over 50, who have served with the same company for 20 years or more, are entitled to severance pay of between two and eight months’ salary.
“Such severance pay, however, is not very common in Switzerland, because the employer can deduct the contributions made to the mandatory pension plan,” says André Lerch, an employment lawyer in Zurich, so the effect of a severance payment is to cut pension benefits later on.
So spare a thought for employees of UBS and Credit Suisse losing their jobs in the banks’ headquarters. Lerch says that banks are not usually any more generous than other industries when it comes to notice periods (one month) and severance pay. Those in Switzerland can take solace from the 3.1% unemployment rate in the country.
Employees in the US can at a least console themselves with the fact that notice periods and severance pay is usually determined by employment contracts, rather than the letter of the law. And, in the case of mass layoffs (500 or more employees) the Worker Adjustment and Retraining Notification Act (WARN), requires employers to give 60 days’ notice.
However, any contract disputes usually favour the company, according to Michael J. Borrelli, an employment lawyer at Borrelli & Associates in New York.
Hong Kong also appears miserly around redundancy – the statutory notice period is just seven days and an employer doesn’t have to legally justify job cuts. However, it’s relatively generous with severance pay – two-thirds of a month’s wages per year of service – and can implement hefty fines (HK$350k) and imprisonment for employers who wilfully withhold severance pay, according to Jennifer Van Dale and Sonia Wong from Baker & Mackenzie.
Middle East financial centres also appear to be scrooges when it comes to job cuts. ‘Redundancy’ is not recognised as a concept in either the UAE or Saudi Arabia and therefore there are no legally binding severance payments. For any expats losing their job, they also forfeit employer sponsorship and so the prospect of being evicted from the country beckons.
However, in practice it’s a softer approach. In the Dubai International Financial Centre, for instance, there’s a provision saying that any employer cutting jobs must give employees a reasonable time to find another job before throwing them out on to the street. And, instead of severance pay, the ‘end of service gratuity’ is a relatively generous 21 days’ basic salary for the first five years of employment, according to Sara Khoja, partner, Employment and Incentives Group, Clyde & Co, Dubai.
In Australia, it’s not necessary for employers to justify layoffs, but statutory payments are quite substantial. Four weeks’ pay is the minimum and this kicks in after just a year in the job, unlike in the UK where two years’ service is required before redundancy payments are mandatory.
Bizarrely, nine years in the same company seems like the ideal time to lose your job in Australia – you could receive up to 16 weeks’ severance pay after this period, but this shrinks to 12 weeks once you’ve worked at the same firm for 10 years, according to Stephen Trew, partner at local law firm Holding Redlich.
Italy’s unemployment rate is currently 11.1%, but at least those losing their jobs in the financial sector can fall back on some solid job loss rights.
In the financial sector, notice periods of between 5-12 months for executives are possible says Olimpio Stucchi, Partner, LABLAW – Studio Legale, Milan, and this comes with equivalent severance pay.
France, Germany and Holland all also have employment laws that favour staff.
In France, an employer needs to jump through numerous hoops to justify redundancies, even if they’re for economic reasons. For instance, assuming SocGen wanted to make job cuts in France for operational reasons, it needs to show that these financial problems relate to the entire company, rather than to just the local subsidiary, according to David Jonin, from French lawyers Gide Loyrette Nouel.
The banking sector also offers a relatively generous quarter of a month’s salary for every quarter of a year’s service.
In Holland, an employer needs to get the all clear from both the court and Dutch labour authorities before rolling out job cuts and failure to follow the proper procedures could lead to an employee’s reinstatement. What’s more, any statutory redundancy payments – already generous, ranging from 0.5-2 months’ salary per year of service, depending on your age – also include average bonus payments over the past three years, which is significant for the banking sector.
Perhaps the most surprisingly favourable regime is mainland China. Statutory redundancy pay is a month for every year of service, and employment laws make it very difficult to implement redundancies, according to Matthew Durham, partner at Clyde & Co in Shanghai.
If you’re the sole bread-winner in China and have either children or elderly dependents, it’s illegal to lay you off. This, however, depends on having a local employment contract as most international banks follow the same procedure regardless of the jurisdiction.
Additional reporting by Simon Mortlock, Florian Hamann, Julia Lemarchand and Beecher Tuttle.
• An employer doesn’t have to justify layoffs, but if an employee claims unfair dismissal, companies need to prove there was a genuine reason for the move.
• Statutory severance payments are four weeks’ pay after one year, rising to a maximum of 16 weeks’ between nine-10 years of service.
• Most banks are more generous – ANZ, for example, offers seven weeks’ pay for the first year of service and four weeks’ for each year after that.
• The maximum statutory notice period is four weeks.
• There is no notice period, but the process takes six-eight weeks in practice.
• Statutory redundancy pay is one month per year of service, capped at RMB12,993 ($2,000) in Shanghai and RMB14,016 in Beijing.
• Employees on fixed-term contracts, open term contracts and who are the only earner and have dependents cannot be selected for layoffs.
• Redundancies must be announced to the whole firm – not just those employees affected – at least 30 days in advance.
• Banks pay half a month’s salary for every year of service before 2002, and a quarter of a month for every quarter worked for the subsequent period.
• Employers who fail to follow procedure can face hefty penalties.
• Notice periods are determined by Collective Bargaining Agreements that vary between companies.
• Employers must consult with works councils, the local labour authorities and employees before announcing layoffs.
• If you’ve been with the company for 20 years, notice periods can be seven months. The minimum notice period is four weeks, however.
• If an employer fails to follow the proper procedure, employment continues and an employer needs to compensate their staff accordingly.
• Redundancy payments are typically one months’ salary for every year of service.
•There is no requirement for employers to legally justify job cuts and if you’ve been employed for less than two years, a reason doesn’t have to be given.
• The statutory notice period is just seven days.
• Redundancy payments can be quite generous, however. Two-thirds of the last full month’s salary (or HK$22.5k, whichever is lower) multiplied by the number of years’ service. The limit is HK$320k.
• An employer could be fined HK$350k and imprisoned for three years if they wilfully withhold severance pay.
• The Italian civil code allows the free withdrawal of a working relationship, provided it’s done in writing.
• Notice periods can range from 5-12 months for senior executives, and severance pay can match this.
• If an employee is dismissed unfairly, an employee can claim between two and seven months’ salary in compensation.
• Redundancy payments start at a half months’ salary per year of service for those under 35 and go up to 2 months' for those over 55. Payments are based on the Cantonal Court Formula.
• Statutory notice periods are one month where they have less than five years of service, two months for between five and 10 years, three months for between 10 and 15 years and four months for 15 years or more.
• Any redundancy payments also take into account average bonuses over the past three years.
• Employers need the permission of the court or Dutch labour authorities in order to proceed with job cuts.
• Most expats are on a fixed-term contract of up to two years. If employment is terminated before the end of this period, an employer needs to pay its employee for the remainder of the contract.
• Redundancy is not a concept in Saudi.
• 30-days written notice of termination is required.
• ‘End of service gratuity’ – the alternative to severance pay – is 15 days’ salary for each year of complete service.
• Statutory notice periods are a maximum of four weeks, but can be as little as one day if you’ve been with the company for less than 26 weeks.
• Common practice for severance pay is one month’s salary per year of service.
• Notice of redundancy plans must be given to employees in writing before the event.
• An employer doesn’t have to provide a reason for redundancy.
• There are no statutory redundancy payments, but most severance pay arrangements are worked out through a trade union or employee group.
• Banks don’t normally extend redundancy payments beyond the basic requirements.
The United Arab Emirates:
• Redundancy is not recognised as a concept, even in the Dubai International Financial Centre.
• There’s no redundancy pay, but ‘end of service gratuity’ is usually 21 days’ salary for every year of service. This goes up to 30 days after five years’ service.
• Firms in the DIFC are required to give affected employees a reasonable amount of time to find alternative employment. This means their employer sponsorship isn’t cancelled and they can stay in the country.
• A three-step process needs to be followed: notifying the employee of the potential decision; meeting the employee face-to-face in order to discuss the potential decision; and then confirming the decision and issuing notice in writing.
• Banks typically pay one month for every year worked in severance pay.
• Unfair dismissal is capped at £72.3k; statutory redundancy is capped at £12.9k
• After two years, one week for every year worked is required as notice period.
• An employer needs to show a genuine redundancy situation – business has ceased to operate or moved to a different place, or the need for a particular type of work has diminished. The entire process needs to be done in a clear and transparent manner.
• With the exception of Montana (not a great employer of financial services professionals), employment in every U.S. state is considered “at will.” This means that firms can dismiss workers at any time, for any reason.
• Most employee rights are governed by employment contracts, but these are weighted in favour of the employer.
• Any mass redundancies need 60 days’ notice.
• For rank-and-file employees, severance pay is rarely more generous in banking than other industries.