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?
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.