In many countries, employees are entitled to statutory severance payments upon termination.
These mandatory payments are tied to an employee’s length of service, and are due to an employee as part of their final pay.
To protect our clients from large final invoices, Deel is assisting clients by accruing monthly amounts to cover these mandatory payments.
This Severance Accrual is separate from the EOR Deposit.
Because statutory severance is tied to length of service, Deel will accrue these amounts over the lifetime of the employment agreement and use them to cover final severance obligations.
The amount of the Severance Accrual charge varies by country and is based on local statutory entitlements.
In this article:
Here's how it works
Each month Deel will add a Severance Accrual charge to your monthly client invoice.
This amount is accrued, and will be used to pay out your employee’s statutory entitlement in the event of termination.
The Severance Accrual is separate from the Deposit Invoice. The Severance Accrual is added to your invoices.
This severance accrual will protect you from large, unexpected severance payments.
In cases of resignations, the amount of severance that has been accrued will be refunded to you.
How is the amount calculated?
The Severance Accrual is calculated on a country-by-country basis and depends on local labor laws and statutory entitlements for terminated employees.
The accrual is spread across multiple invoices, and you can see the status of the installments on the invoice.
It will be re-evaluated annually to ensure that it covers the necessary severance payment for your employee, including any changes to employment law or your employee’s salary.
For more details on the invoice item calculations, see our FAQ
What countries have statutory severance payment accrual for EOR employees?
Currently 49 countries have some form of statutory offboarding payments for EOR employees after termination.
The accrual period and payment amounts vary by country.
|Argentina||Czech Republic||India||Moldova||South Korea|
|Brazil||Germany||Lithuania||Philippines||United Arab Emirates|
|Costa Rica||Hungary||Mexico||South Africa|
[ACCORDION] What is the monthly payment amount for severance accrual?
The amount is calculated based on country-specific entitlements.
For example, if an employee is entitled to one month of severance per year of employment, you will be invoiced for 1/12 month salary each month for the first year.
Where an employee is automatically entitled to a minimum fixed severance amount following the probation period, Deel will collect that amount during the first year of the employment agreement.
For example, for an employee entitled to 4 months of severance on termination, Deel will collect 1/3 month salary each month for the first year of the agreement.
On the anniversary of the employment agreement, Deel will assess the accrual logic, any changes to local labor laws, and the employee’s salary to ensure that the accrual logic continues to meet your statutory severance obligation.
[ACCORDION] How will the severance accrual be used to pay severance?
Upon termination, the Severance Accrual will be netted off with the final invoice.
[ACCORDION] How is the Severance Accrual different from the EOR Deposit?
The Severance Accrual accrues over the lifetime of an employee’s agreement and is used to pay final severance obligations that are tied to the length of an employee’s service.
The EOR deposit is an initial deposit that is used to pay the employee’s salary in the rare event that Deel needs to pay an employee’s salary if a client is late in paying their invoices.
[ACCORDION] What happens if the salary changes?
If you change an employee's salary, we will continue collecting severance accrual based on the old salary until the anniversary of the employment agreement, when the amount will be updated.
[ACCORDION] What happens if the employee resigns?
This severance amount is accrued, and will be used to pay out your employee’s statutory entitlement in the event of termination.
In the event of a resignation, the amount of severance that has been accrued will be refunded to you.
[ACCORDION] Can I see what has been accrued so far?
Yes. For active agreements, you will see in every invoice the progress of accrual installments, (e.g. 3 of 12), and you can also see the total amount on the employment agreement details below the deposit info.
For new employment agreements, you can find this information on the quote we will provide you.