Lay-offs and terminating employment relationship


In a lay-off the employer temporarily terminates work and the payment of wages and salaries, while the employment relationship remains in effect in other respects.

An employee can be laid off as a result of a reduction in the work available or a deterioration in the prerequisites for offering work. The lay-off may be implemented for financial or production-related reasons. A lay-off can be based on a unilateral decision by the employer or an agreement between employer and employee. In such cases, too, the lay-offs may only be implemented as a result of the employer’s action or its financial situation.

Implementing lay-offs

A lay-off can be implemented for an indefinite or a fixed period and it may mean termination of all work or shortening of working hours. An employee working on a fixed-term contract may be laid off only when he/she is working as a substitute for a permanent employee and the employer would have the right to lay off the permanent employee.

The employer must notify the employee of the lay-off well in advance. The employer must also provide the employee with a personal lay-off notification no later than 14 days before the start of the lay-off, specifying the reason for and start date and duration of the lay-off.

Terminating employment relationship

An employment contract valid until further notice can be terminated on the basis of a notice of termination by the employer or the employee, after the period of notice. In certain situations it can also be terminated with immediate effect as a result of the cancellation of the employment contract.

Notice of termination

The length of the period of notice depends on the length of the employment relationship. The longest period of notice to be observed by the employer is six months and the shortest 14 days. When an employee gives notice, the period of notice is either 14 days or one month.  

An employer must have relevant and substantial reasons for giving employee notice. Grounds for giving notice may either be related to the employee or derive from financial or production-related reasons or they may be related to the rearrangement of the employer’s operations. An employee does not need to give any specific reasons for giving notice. 

Employees that have neglected their duties under the employment contract may not be given notice before they have been provided with an opportunity to correct their action through the issuance of a warning.

Cancelling employment contract

The employment contract may only be cancelled for very serious reasons. Breach or neglect of the obligations under the contract by one of the parties on the basis of which it would be unreasonable to expect the other party to continue the contractual relationship even for the duration of the period of notice is considered such a reason. When an employment contract is cancelled, it ends with immediate effect without a period of notice.

If an employee or employer has been absent from work or the workplace for at least seven days without providing a valid reason for the absence during that time, the other party has the right to consider the employment contract cancelled.

See also

Employee’s position if employer becomes insolvent

Further information:

Guidance and supervision of  labour legislation: Occupational Safety and Health Administration (Osha)
Law-drafting: Nico Steiner, nico.steiner(at)