Q&A – 18 May 2020

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Transport and subsistence allowance after resignation

In January 2019 our Company employed a civil engineer on a two-year renewable contract. He was recruited in Dar es Salaam and posted to Morogoro where we have a branch. Two weeks ago he voluntarily resigned giving a 24 hour notice. He paid the Company a 1-month remuneration in lieu of notice according to the employment contract and the labour law. 2 weeks after depositing the notice pay to the Company’s bank account, he lodged a claim for transport allowance for himself, family and personal effects from Morogoro to Dar es Salaam. He is also claiming to be paid subsistence allowance from the date of resignation to the date he will be transported to  Dar es Salaam or given the transport allowance. Are his claims genuine? What does the law say on these claims?
TR, Morogoro

Rule 3(1)(a) and (2)(d) of the Employment and Labour Relations (Code of Good Practice) Rules, 2007 (Rules) recognises resignation as one of the forms of termination of employment contracts. However, rule 6(1) of the Rules imposes a condition that an employee serving a fixed term contract should not resign before the expiry of his fixed contract term unless he gets the employer to agree to his resignation or he proves that the employer has materially breached the contract to the extent of forcing him to resign.

If an employee resigns without consent of the management, he is taken to have breached the contract and cannot be entitled to a repatriation cost or any other terminal dues including subsistence allowance pending the repatriation to his place of recruitment. But if an employee seeks and obtains consent of the management to resign before the expiration of his fixed term contract, his resignation is treated as a lawful resignation and for that matter he is entitled to a repatriation or transport cost from place of termination to place of recruitment just like a resignation by an employee with unspecified term contract.

The employee’s right to a repatriation or transport cost from his work station to the place of recruitment is provided under section 43 and 44(1)(f) of the Employment and Labour Relations Act, 2004. The employer has three ways of transporting the employee to the place of recruitment. The employer can use the Company’s car to transport the employee, his family and personal effects to the place of recruitment. The second method is hiring a car for the employee to repatriate him. The third way is by paying the employee a transport allowance equal to a bus fare up to the bus station which is nearest to the employee’s place of recruitment. The bus fare covers the employee, his spouse and children. The law is silent on the number of spouses or children covered.

Taking into account the discussions above, apart from the transport cost, the employer has to pay the employee subsistence allowance between the date of resignation and the date of transporting him to the place of recruitment. The law does not provide the rate of subsistence allowance but we think it should be equal to the daily basic wage of the employee.

Work permit expiry and employment contract

Our Company employed an expatriate on an unspecified term contract. The expatriate has worked for us for five years. His work permit is expiring at the end of this May and the Company does not intend to apply for its renewal. Will failure to apply for renewal amount to unlawful termination of the contract? In paying him the terminal dues, how will we compute the notice pay, severance pay and subsistence allowance pending the repatriation to his home country?
PO, Moshi

Under section 12(4) of the Non-citizens (Employment Regulation) Act, 2015, the aggregate period an expatriate can work in Tanzania is five years unless the employer for whom the expatriate is working is an investor whose contribution to the economy or well-being of the people is of great value. Unfortunately the law does not define or provide the method of testing an investor whose contribution is of great value to the economy or well-being of the people. It is the discretion of the Labour Commissioner to decide.

The employment contract of an expatriate is subject to renewal of the work permit and residence permit. If the two permits cannot be renewed or application for renewal is refused because the employee has exhausted the aggregate term within which he can legally stay or work in Tanzania, the employment contract is taken to have been automatically terminated. Such automatic termination cannot amount to unlawful termination unless the Company for which the expatriate works is an investor whose contribution to the economy or well-being of people is of great value which makes the renewal of the work permit possible beyond five years.

Section 41(5) of the Employment and Labour Relations Act, 2004 requires the calculation of notice pay to be based on the gross remuneration of the employee. Section 4 of the same Act defines remuneration as total value of all payments in money or kind that would have been due to the employee had he worked during the notice period. The common mistake employers do is calculating the notice pay based on the basic salary which excludes the allowance payable to the employee monthly.

While the computation of notice pay is based on the gross income of the employee including allowances like rent allowance etc calculation of severance pay is based on the basic wage which does not include allowances. Section 4 of the Employment and Labour Relations Act defines basic salary which excludes of allowances payable to the employee monthly. Save for notice pay, the computation of other terminal dues is based on the basic wage unless the employment contract with the expatriate provides to the contrary.