When your employment ends in Zambia, you may be entitled to several different payments depending on your contract type and the reason for leaving. Gratuity is just one of them. This guide explains each type of terminal benefit, who qualifies, and when they apply.
Use our gratuity calculator to check your gratuity entitlement, and our PAYE calculator to estimate the tax on any terminal payment.
The four types of terminal benefits
1. Gratuity
A lump-sum payment at the end of a fixed-term contract exceeding 12 months. Minimum 25% of total basic pay earned during the contract. Governed by Section 73 of the Employment Code Act 2019.
Who qualifies: Employees on fixed-term contracts longer than 12 months
When it applies: Contract expiry, early termination, mutual agreement, or redundancy
Calculation: Monthly basic pay x total months worked x gratuity rate
Taxable: Yes - subject to PAYE, NAPSA, and NHIMA
2. Severance pay
Compensation paid when an employer terminates employment due to redundancy. This is separate from gratuity and is governed by Section 54 of the Employment Code Act.
Who qualifies: Employees terminated due to redundancy (business closure, position elimination, downsizing)
When it applies: Only on redundancy - not resignation, dismissal for cause, or contract expiry
Calculation: As agreed between parties or as determined by the Minister, whichever is greater
Notice required: Employer must give 30 days notice to employee representatives and 60 days notice to the Labour Commissioner
3. Leave pay
Payment for accrued but unused leave days at the time of contract termination. Employees earn at least 2 days of leave per completed month of service (24 days per year).
Who qualifies: All employees with unused leave days at termination
When it applies: Any termination except desertion or summary dismissal
Calculation: Daily rate x number of unused leave days
Taxable: Yes - treated as income
4. Notice pay (pay in lieu of notice)
If either party terminates employment without serving the required notice period, the other party is entitled to payment equivalent to the notice period. The standard notice period is one month for most contracts.
Who qualifies: The party who did not receive proper notice
When it applies: Termination without the required notice period being served
Calculation: Monthly salary x notice period (usually 1 month)
Side-by-side comparison
Benefit | Trigger | Who Qualifies | Minimum Entitlement |
|---|---|---|---|
Gratuity | Contract ends | Fixed-term contracts >12 months | 25% of total basic pay |
Severance pay | Redundancy | All employees made redundant | As agreed or per Minister |
Leave pay | Any termination | All with unused leave | 2 days per month worked |
Notice pay | No notice given | Party not given notice | 1 month salary (typical) |
Can you receive more than one?
Yes. These benefits are not mutually exclusive. An employee terminated by redundancy could receive:
Severance pay (because the reason was redundancy)
Gratuity (if they were on a qualifying fixed-term contract)
Leave pay (for any accrued but unused leave days)
Notice pay (if the employer did not serve proper notice)
Key point: Gratuity and severance pay serve different purposes. Gratuity compensates for being on a fixed-term contract rather than permanent employment. Severance compensates for losing your job through no fault of your own.
When must terminal benefits be paid?
Under Section 66(4) of the Employment Code Act, an employer must pay all wages and accrued benefits - including gratuity, leave pay, severance, and any outstanding salary - on the date of termination of the contract.
Failure to comply may attract administrative penalties. If your employer has not paid, you can report the matter to an authorised officer under Section 121.
Who gets what: by contract type
Contract Type | Gratuity | Severance | Leave Pay | Notice Pay |
|---|---|---|---|---|
Fixed-term (>12 months) | Yes | If redundancy | Yes | If not served |
Permanent & pensionable | No (pension instead) | If redundancy | Yes | If not served |
Casual (<1 month) | No | No | No | No |
Probation | No | No | Pro-rata | As per contract |
Frequently asked questions
Can I receive gratuity if I resign before my contract ends?
Yes. Gratuity is calculated on the months actually worked, not the full contract term. If you resign after 18 months of a 3-year contract, you receive gratuity for 18 months of service.
Is severance pay the same as gratuity?
No. Gratuity is paid at the end of any qualifying fixed-term contract regardless of the reason. Severance pay is only paid when employment ends due to redundancy. You can receive both if you are on a fixed-term contract and are made redundant.
What happens to my NAPSA contributions when I leave?
Your NAPSA contributions remain in the fund and count towards your retirement benefits. They are not paid out as a terminal benefit. You can only access NAPSA benefits at retirement age, or earlier in specific circumstances like permanent disability or emigration.
For a step-by-step calculation walkthrough, see our guide to calculating gratuity. To understand the tax implications, read Is gratuity taxable in Zambia?.