A guide for employers
Ending an employee's job: TEWA, redundancy and VRS
When you end employment for a reason other than misconduct, the Termination of Employment of Workmen Act sets what you must do, and what it will cost.
Who it covers
Workers with six months' service, at employers of fifteen or more.
TEWA applies to employers with fifteen or more workers. A covered worker is one who has completed at least one hundred and eighty days of service, roughly six months.
Employees still inside that first period, along with public-sector and cooperative employees, sit outside the Act. Everyone else on your payroll is protected by it.
What it requires
Consent, or the Commissioner's written approval.
Before you end a covered worker's employment for a non-disciplinary reason, such as redundancy, closure or restructuring, you need one of two things: the worker's prior written consent, or the prior written approval of the Commissioner General of Labour.
Neither notice nor a settlement cheque replaces this. A termination made without consent or approval is void, and a Labour Tribunal can order the worker reinstated with back pay.
Misconduct is a separate process. Dismissal for proven misconduct is handled through a disciplinary inquiry, not the consent or approval route above. Treating one as the other is where terminations most often go wrong.
The compensation scale
Months of salary per year, up to a ceiling.
Where a termination goes through the Commissioner, compensation follows a published scale, set in months of salary for each year of service. The rate falls as service lengthens.
- Years 1 to 5: 2.5 months’ salary for each year.
- Years 6 to 14: 2 months for each year.
- Years 15 to 19: 1.5 months for each year.
- Years 20 to 24: 1 month for each year.
- Years 25 to 34: half a month for each year.
Worked example. A worker with ten years of service is entitled to 22.5 months' salary: five years at 2.5 months, then five years at 2 months. On a salary of Rs 80,000 that is Rs 1,800,000. The total is capped at 48 months' salary, or Rs 2.5 million, whichever is lower, so on higher salaries the money ceiling can apply before the scale does.
Redundancy and voluntary schemes
Redundancy runs the same route; a voluntary scheme is the other.
Redundancy is a non-disciplinary termination, so it needs consent or the Commissioner's approval and carries the compensation above, on top of gratuity, accrued leave and the EPF and ETF that are due in any case.
This is why many employers use a voluntary retirement scheme. A genuine, agreed departure is the worker's own written consent, which is itself a lawful route and avoids the Commissioner process. The offer has to be truly voluntary: consent given under pressure can be challenged later as a forced exit, so the terms and the way they are put matter.
This guide is general information for employers, not legal advice, and does not create a client relationship. Sri Lankan law and the applicable figures change, and how they apply depends on your circumstances. A termination or redundancy is the area where a wrong step is most costly, so confirm your position with a qualified adviser before acting on a specific case.