In brief: Severance pay in Morocco compensates employees dismissed without just cause. It is calculated based on seniority: 96 to 240 hours of salary per year. Only CDI employees with at least six months of service qualify. Gross misconduct disqualifies the employee.
Severance pay in Morocco is a crucial component of labour law, providing financial protection to employees in the event of contract termination. Severance pay is the amount an employer pays to an employee upon wrongful dismissal.
This mechanism aims to compensate the employee for job loss under certain conditions, reflecting a form of social security within the Moroccan legislative framework. Understanding the rules governing severance pay is not limited to employees; it also extends to employers who must navigate the legal framework with precision to comply with the law and avoid potential disputes.
The following article aims to clarify the key aspects of severance pay:
- Eligibility criteria required to qualify for this pay.
- The calculation process: the role of seniority and salary, as well as damages applicable in cases of wrongful dismissal.
- The elements taken into account in the calculation, including benefits in kind.
- Situations in which an employee may be excluded from the right to severance pay, particularly in cases of gross misconduct.
Severance pay in Morocco: Legal rules
In Morocco, the Labour Code considers any dismissal without just cause as wrongful. Accordingly, Article 35 of the code stipulates that the employer may not dismiss the employee: “without a valid reason unless it relates to their aptitude or conduct (…) or is based on the operational requirements of the business”.
A company that dismisses an employee for gross misconduct does not owe any severance pay.
The law provides a restrictive list of situations it considers as gross misconduct in Article 39 of the Labour Code. These include:
- An offence against honour, trust, or good morals. In this case, the offence must have resulted in a final judgement of imprisonment;
- Disclosure of a professional secret causing harm to the company;
- …
In the absence of such offences, the dismissal cannot follow the gross misconduct procedure. In the case of dismissal for gross misconduct, the employee is entitled neither to notice nor to severance pay.
Components of severance pay in Morocco
Severance pay generally consists of: a severance indemnity proper and damages. In some cases, it also includes a notice pay.
Severance indemnity: calculation method
In the case of termination without just cause, the employee is entitled to severance pay. The amount of severance pay for each year or fraction of a year of actual work is equal to:
- 96 hours of salary for the first five years of seniority;
- 144 hours of salary for the seniority period from 6 to 10 years;
- 192 hours of salary for the seniority period from 11 to 15 years;
- 240 hours of salary for seniority exceeding 15 years.
Damages in case of dismissal: calculation method
In the case of wrongful termination of the employment contract, the injured party has the right to claim damages. Any provision in the employment contract whereby the employee waives this entitlement is null and void.
An employee whom the employer dismisses for a reason they consider wrongful may resort to the preliminary conciliation procedure.
Notice pay
An employee dismissed without just cause is entitled to notice. The notice period is set by the employment contract. This notice period cannot be less than the duration set by regulation. This period is calculated as follows:
| **EMPLOYEE** | **EXECUTIVE** | |
| Less than one year of seniority | 8 days | 1 month |
| Between 1 and 5 years of seniority | 1 month | 2 months |
| Over 5 years | 2 months | 3 months |
Severance pay: eligibility conditions
The eligibility conditions for receiving severance pay in Morocco are defined by the Labour Code.
To qualify for this pay, an employee must meet several specific criteria that ensure the protection of workers’ rights in the event of contract termination.
- Seniority. The law stipulates that an employee is not entitled to severance pay during the probation period. Generally, the employee must have worked at least six months within the same company to qualify for this pay. This condition underscores the importance of length of service as a basic criterion for granting severance pay, reflecting the recognition of the employment relationship and the employee’s personal investment in the company.
- Type of contract. Only employees under permanent contracts (CDI) are eligible for severance pay under Moroccan law. This specificity is due to the nature of the permanent contract, considered a long-term commitment between employee and employer, in contrast to the flexibility and temporary nature of fixed-term contracts (CDD). In the case of fixed-term contracts, other contract termination conditions apply.
- Absence of gross misconduct. Under Moroccan labour law, certain acts of gross misconduct may exclude the employee from the right to severance pay. These offences, defined by law, include acts such as disclosure of professional secrets, theft, physical assault, or drug use in the workplace. These exclusions aim to maintain a balance between employee rights and their obligations to their employer and the proper functioning of the company.
For more information on this subject,
Calculating severance pay in Morocco
Calculating severance pay is a fundamental aspect of labour law in Morocco, determining the amount owed to an employee in the event of contract termination. This process is based on precise criteria established by the Moroccan Labour Code to ensure fair compensation for the employee while respecting the employer’s legal obligations.
As stated above, this pay consists of:
Statutory severance indemnity: the statutory severance indemnity is calculated based on the employee’s hourly wage and their seniority within the company. This graduated structure reflects the legislator’s intention to reward employees’ long-term commitment to their company. Moroccan law specifies that the indemnity must be based on:
- 96 hours of salary per year for the first five years of seniority;
- 144 hours of salary per year for the seniority period from 6 to 10 years;
- 192 hours of salary per year for the seniority period from 11 to 15 years;
- 240 hours of salary per year for seniority exceeding 15 years.
Damages for wrongful dismissal: In addition to the statutory indemnity, an employee dismissed without just cause may claim damages. The amount is generally equal to 1.5 months of salary per year of seniority, capped at 36 months. These damages are intended to compensate the employee for the harm suffered as a result of wrongful dismissal.
Calculation basis for severance pay in Morocco
The calculation basis for severance pay in Morocco is based on a holistic approach to the employee’s compensation, incorporating not only the base salary but also various benefits and allowances.
Base salary and allowances
The calculation of severance pay begins with the employee’s base salary. This amount is then adjusted to include various allowances and bonuses that may be considered a regular part of the employee’s compensation. These may include performance bonuses, annual bonuses, or other forms of variable compensation.
Benefits in kind
Benefits in kind play a significant role in the calculation of severance pay, reflecting the total value of the employee’s compensation beyond their cash salary. These benefits may include, but are not limited to, housing, meals, and the use of a company car. The value of these benefits is calculated and added to the total amount of the indemnity, ensuring that the assessment of the employee’s compensation is complete and fair.
Calculation of the salary average
The calculation basis for the indemnity also takes into account the average gross salary received by the employee during the last months of their employment, including the base salary as well as allowances and benefits in kind. This average serves as a reference for determining the amount of severance pay, ensuring that the calculation accurately reflects the employee’s recent compensation.
Frequently Asked Questions
How is severance pay calculated in Morocco?
Severance pay in Morocco is calculated based on the employee’s hourly wage and seniority. The rates are 96 hours of salary per year for the first 5 years, 144 hours for years 6 to 10, 192 hours for years 11 to 15, and 240 hours for seniority exceeding 15 years. Benefits in kind and allowances are included in the calculation basis.
Who is eligible for severance pay in Morocco?
Only employees under permanent contracts (CDI) who have completed at least six months of service are eligible for severance pay. Employees dismissed for gross misconduct, as defined in Article 39 of the Labour Code, are not entitled to severance pay or notice period compensation.
What damages can an employee claim in addition to severance pay?
In addition to the statutory severance indemnity, an employee dismissed without just cause may claim damages equal to 1.5 months of salary per year of seniority, capped at 36 months. The employee may also receive notice pay based on their seniority and professional category.
Is severance pay subject to income tax in Morocco?
The statutory portion of severance pay, calculated according to the Labour Code scales, is exempt from income tax. However, the 2023 Finance Law capped the total exempt amount at MAD 1,000,000. Any amount exceeding the statutory calculation or this cap is subject to income tax, with the employee able to choose the spreading system or the average rate method.
This guide was prepared by Upsilon Consulting, a chartered accounting firm in Casablanca with over 20 years of experience in Moroccan labour law and payroll compliance.
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