Severance pay in Tanzania is provided under the Employment and Labour Relations Act, 2004, and the formula has a specific ceiling worth understanding.
The entitlement
An employee who has completed at least one year of service with the employer is entitled to severance pay.
At least seven days' basic wage for each completed year of employment, up to a maximum of ten years.
The calculation used in practice:
Gross monthly salary ÷ 26 working days × 7 × years of service (max 10)
The cap is on years, not money
This is the point people miss. The maximum is ten years of service counted — so an employee with 18 years receives the same as one with 10.
Service beyond the tenth year adds nothing to severance.
When severance is NOT payable
Under the Act and its amendments:
- Termination for misconduct — an employer is correct to refuse severance in that case
- Where an employee terminated on grounds of capacity or operational requirements unreasonably refuses to accept alternative employment with that employer
- Retirement — under an amendment to Section 42 by the Written Laws (Miscellaneous Amendments) Act No. 3 of 2010, a retired employee is not entitled to severance, on the logic that they receive a pension instead
- Where a fixed-term contract has automatically expired
The alternative employment point
Worth noting carefully: if you are retrenched and offered a reasonable alternative role within the same employer, refusing it without good reason can forfeit your severance.
Consider any such offer before declining.
What else is owed
Severance is one of several terminal benefits under Section 44, not the whole settlement.
Unfair termination
Termination is unfair if the employer fails to prove that the reason is valid, related to the employee's conduct, capacity or compatibility, or based on the operational requirements of the employer.
A written termination notice is required before terminating a worker's services.
Frequently asked questions
How is severance calculated in Tanzania?
At least seven days’ basic wage per completed year, up to a maximum of ten years — in practice, gross monthly salary divided by 26, times 7, times years capped at 10.
What does the ten-year cap mean?
The cap is on years counted, not on the amount. An employee with 18 years receives the same as one with 10, since service beyond the tenth year adds nothing.
When is severance not payable?
On termination for misconduct, on retirement, where a fixed-term contract has automatically expired, or where an employee unreasonably refuses reasonable alternative employment.
Why does retirement exclude severance?
Under an amendment to Section 42 by the Written Laws (Miscellaneous Amendments) Act No. 3 of 2010, on the logic that the retired employee receives a pension instead.
What makes a termination unfair?
If the employer fails to prove the reason is valid, related to the employee’s conduct, capacity or compatibility, or based on the employer’s operational requirements.