The Economics of Redundancy Compensation
A reduction of the workforce — economic, technological or organizational changes necessitating it — is a lawful ground for termination of an employment contract (Article 47), but dismissal on this ground is tied to monetary obligations: two alternative regimes of prior notice and compensation (Article 48) and the final settlement (Article 44). This page assembles precisely the redundancy package: what the employer must pay, which variant to choose and within which deadlines.
Two Alternatives: Notice or Buy-Out
On termination on the redundancy ground the law gives the employer two options (Article 48). The first: to give the employee preliminary written notice no less than 30 calendar days in advance — in which case the compensation must be no less than 1 month's remuneration. The second: to give notice no less than 3 calendar days in advance — in which case compensation of no less than 2 months' remuneration is paid. The first variant saves money at the cost of time, the second spends money to save time: the right choice depends on budget and operational needs. In both cases the obligation arises together with the sending of the written notice, and the actual amounts are calculated from the individual contract.
The Final Settlement — a 7-Day Deadline
Upon termination of the employment relationship the employer is obliged to make the final settlement no later than 7 calendar days after termination, unless otherwise defined by the contract or the law (Article 44). The final settlement means the calculation of salary, compensation for unused leave and other accruals up to the last working day. Within the redundancy package this means that the reduction amount is supplemented by everything that remains unaccrued at the moment of termination — and this calculation has a statutory 7-day deadline.
Substantiation of the Ground and Deadlines
Termination on the redundancy ground takes place by written notice, and where termination rests on other objective circumstances, the employer is obliged to substantiate in the notice the objective circumstance that in its view justifies the termination (Article 47). The employee, within 30 calendar days of receiving the notice, may demand written substantiation of the ground, and the employer answers within 7 calendar days; within 30 calendar days of receiving the substantiation or the notice, the decision may be challenged in court. In planning the package these deadlines must be entered into both parties' calendars: paying compensation does not negate a dispute, but precise observance of the procedure sharply reduces the risk.
If the court declares the decision void, the employer is obliged to reinstate the person, provide equivalent work or pay compensation; beyond reinstatement or compensation, compensation for forced idleness is also demanded, in the determination of which the court takes into account the compensation already paid. That is precisely why the redundancy package should be built from the outset at least on the law's minimum standards.
The calculation of a compensation package consists of three layers: the minimum compensation under the chosen alternative — no less than 1 or 2 months' remuneration; the components of the final settlement — salary up to the last working day and compensation for unused leave, whose payment has a 7-calendar-day deadline; and the procedural documentation — the written notice with the exact term. Each layer should be set out on separate paper, because in a dispute the court first examines the procedure and only then the amounts.
An additional layer of risk is created by forced idleness: if the termination is declared void, compensation is counted from the day of termination until the enforcement of the decision — therefore the economics of the package should always include a model of this scenario, although precise observance of the procedure reduces its probability to a minimum.
Transparency is as important as the amount: each calculation should be handed to the employee in written or otherwise intelligible form, so that the parties' expectations coincide and any dispute arises not from arithmetic but only from legal questions.
Frequently Asked Questions
What is the minimum compensation on redundancy?
With 30 days' notice — no less than 1 month's remuneration; with 3 days' notice — no less than 2 months' remuneration.
When must the final settlement be made?
No later than 7 calendar days after termination, unless otherwise defined by contract or law.
Is a 3-day notice possible?
Yes — by written notice no less than 3 calendar days in advance, but then the compensation doubles: no less than 2 months' remuneration.
What is added to the compensation?
All components of the final settlement — salary up to the last day and compensation for unused leave; the calculation must be completed within 7 days.
How We Help on Legal.ge
Structuring a redundancy package correctly means combining cost calculation, comparison of alternatives and documentary accuracy in one procedure. On the Legal.ge platform you can find an experienced labor law lawyer who will help you calculate the package, prepare the notices and control the final settlement — on the employer's side, or, if you are the employee being made redundant, verify your amounts. Choose a specialist and carry out the reduction lawfully and transparently.