Severance Agreement (Ghana)

A Severance Agreement in Ghana records the obligations the parties accept and the terms governing their arrangement.

Section 66 of the Labour Act 2003 (Act 651) establishes the statutory minimum severance pay entitlement for workers whose employment is terminated in Ghana otherwise than by reason of the worker's own misconduct. The statutory minimum is generally computed on the basis of the employee's length of continuous service and last basic salary. The Severance Agreement records any enhanced severance payment that exceeds the statutory minimum under Section 66 of Act 651, in consideration for which the employee agrees to release all employment-related claims — including claims for unfair termination before the National Labour Commission (NLC) and the High Court (Labour Division) in Accra.

The National Pensions Act 2008 (Act 766) requires every employer in Ghana to make SSNIT contributions on behalf of employees until the last day of employment. A Severance Agreement should confirm that the employer will comply with Act 766 in respect of all salary payments made under the agreement, including any salary payments in lieu of notice. The Income Tax Act 2015 (Act 896) administered by the Ghana Revenue Authority (GRA) governs the tax treatment of severance payments. Statutory severance payments under Section 66 of Act 651 up to the prescribed threshold may attract reduced tax rates or exemptions under Act 896; enhanced payments above the statutory minimum are generally subject to Pay As You Earn (PAYE) tax.

The Electronic Transactions Act 2008 (Act 772) recognises electronic signatures as legally valid in Ghana. A Severance Agreement executed by electronic signature through a compliant platform is enforceable before the National Labour Commission (NLC) and the High Court (Labour Division) in Accra under Section 8 of Act 772. The Data Protection Act 2012 (Act 843) requires the employer to handle the departing employee's personal data — including payroll records, performance appraisals, and disciplinary files — in compliance with the data protection principles enforced by the Data Protection Commission (DPC) after the termination of employment.

Where the Severance Agreement involves a senior employee or an executive whose remuneration includes shares, share options, pension entitlements, or benefits under a Tier 2 or Tier 3 pension scheme managed by a fund manager licensed by the National Pensions Regulatory Authority (NPRA), specialist advice from a solicitor enrolled with the Ghana Bar Association and a tax practitioner licensed by the Institute of Chartered Accountants Ghana (ICAG) is recommended before execution.

The legal framework governing the Severance Agreement (Ghana) in Ghana draws on several key statutes and regulatory bodies. Under the Labour Act 2003 (Act 651), the National Labour Commission (NLC) adjudicates workplace disputes in Ghana. Section 12 of the Labour Act 2003 requires written terms of employment. The National Pensions Act 2008 (Act 766) mandates employer contributions to the Social Security and National Insurance Trust (SSNIT). The Ghana Revenue Authority (GRA) administers PAYE under the Income Tax Act 2015 (Act 896). The Labour Division of the High Court hears employment appeals. Parties executing a Severance Agreement (Ghana) in Ghana should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Labour Act 2003 (Act 651) sets the foundational requirements.

A Severance Agreement in Ghana is needed whenever an employer and an employee agree on the financial terms of the employee's departure and wish to record a full and final settlement of all employment-related claims in a legally binding document.

A Severance Agreement is required when a company incorporated under the Companies Act 2019 (Act 992) terminates a senior manager, director, or executive employee and wishes to make an enhanced severance payment above the statutory minimum under Section 66 of the Labour Act 2003 (Act 651) in exchange for a full and final release of all claims, including any potential unfair termination claim before the National Labour Commission (NLC).

A Severance Agreement is needed when an employer undertakes a redundancy programme and wishes to record the agreed terms of departure for each redundant employee — including redundancy pay, outstanding salary, accrued annual leave pay, and the handover procedure — in a document that protects the employer from future claims.

A Severance Agreement is required when an employee who has been on long-term sick leave, performance management, or a disciplinary process agrees to leave employment on negotiated terms that avoid the uncertainty and cost of proceedings before the National Labour Commission (NLC) or the High Court (Labour Division) in Accra.

A Severance Agreement is needed when a mining company operating under a licence from the Minerals Commission of Ghana, an oil and gas operator licensed by the Petroleum Commission of Ghana, or a bank regulated by the Bank of Ghana (BoG) terminates a senior professional and needs to address the treatment of confidential information, non-solicitation obligations, and the return of access credentials alongside the financial settlement.

A Severance Agreement is required when a foreign national employed in Ghana by a company registered with the Ghana Investment Promotion Centre (GIPC) under the GIPC Act 2013 (Act 865) departs and the employer needs to address the financial settlement alongside the cancellation of the work and residence permit issued by the Ghana Immigration Service.

A Severance Agreement is needed when a departing employee has access to trade secrets, client relationships, or proprietary technology and the employer wishes to reinforce post-employment confidentiality and non-solicitation obligations as part of a thorough departure package.

A binding Severance Agreement in Ghana under the Labour Act 2003 (Act 651) and the Contracts Act 1960 (Act 25) must contain the following essential elements.

Parties and Employment Details: Full legal names of the employer (including company registration number from the Office of the Registrar of Companies (ORC)) and the employee (including Ghana Card number). The employee's job title, department, and employment start date. The agreed last day of employment.

Termination Date and Notice: The agreed last date of employment. Where notice has not been worked, a payment in lieu of notice calculated at the contractual notice rate under the employment contract and consistent with Section 19 of the Labour Act 2003 (Act 651).

Severance Pay: The severance payment, expressed as a number of months' salary or a fixed GHS amount. The payment must meet or exceed the statutory minimum under Section 66 of Act 651. Any enhanced amount above the statutory minimum should be stated separately as an ex-gratia payment. The Severance Agreement should confirm whether PAYE tax under the Income Tax Act 2015 (Act 896) will be deducted before payment, and at what rate, having regard to any applicable exemption threshold under Act 896.

Final Salary and Accrued Leave: Confirmation of the final salary payment including any arrears. The accrued and untaken annual leave balance expressed in days and the monetary value of the leave pay, calculated in accordance with Section 31 of the Labour Act 2003 (Act 651).

Benefits Settlement: Treatment of any outstanding benefits — company car, laptop, phone, expense claims, bonus entitlements, and Tier 2 or Tier 3 pension entitlements under the National Pensions Act 2008 (Act 766) administered by the National Pensions Regulatory Authority (NPRA).

Return of Company Property: A list of company property to be returned by the employee on or before the last day of employment — including access cards, keys, laptops, mobile phones, company vehicles, and confidential documents.

Mutual Release: A full and final release by the employee of all employment-related claims — including claims for unfair termination under the Labour Act 2003 (Act 651), outstanding salary, bonus, leave pay, pension contributions, and any other claim arising out of the employment relationship — in exchange for the financial package. A corresponding release by the employer of claims it may have against the employee.

Confidentiality and Post-Employment Restrictions: Reaffirmation of the employee's post-employment confidentiality obligations and any agreed non-solicitation restrictions. These provisions must be reasonable in scope and duration to be enforceable under the Contracts Act 1960 (Act 25).

Reference: The employer's agreed reference for the employee — either a standard factual reference confirming dates of employment and job title, or an enhanced reference where agreed.

Governing Law: Ghana law governs. Disputes may be referred to the National Labour Commission (NLC) under the Labour Act 2003 (Act 651) or to the High Court (Labour Division) in Accra.

Forms-legal.com provides this Severance Agreement template as a starting point for employers and employees in Ghana. Legal advice from a solicitor enrolled with the Ghana Bar Association is recommended for high-value departures or where the employee has potential claims before the National Labour Commission (NLC).

Additional compliance elements for a Severance Agreement (Ghana) used in Ghana include: Under the Labour Act 2003 (Act 651), the National Labour Commission (NLC) adjudicates workplace disputes in Ghana. Section 12 of the Labour Act 2003 requires written terms of employment. The National Pensions Act 2008 (Act 766) mandates employer contributions to the Social Security and National Insurance Trust (SSNIT). The Ghana Revenue Authority (GRA) administers PAYE under the Income Tax Act 2015 (Act 896). The Labour Division of the High Court hears employment appeals. Forms-legal.com provides this template as a starting point for Ghana-compliant documentation.