---
title: "Sri Lanka Termination & Severance 2026"
description: "Sri Lanka termination 2026: firing a covered worker needs the Commissioner of Labour's written approval, with compensation capped at LKR 2,500,000."
canonical: https://www.teamed.global/country-hiring-guides/sri-lanka/termination-and-severance
---

Sri Lanka · Termination child

Served by Teamed vetted partner-entity network in Sri Lanka

# How do you *terminate an employee in Sri Lanka* in 2026?

Before you can let a covered worker go in Sri Lanka, you need either their written consent or the Commissioner of Labour's prior written approval. The rule bites once you employ 15 or more workmen, and the compensation the Commissioner can award reaches LKR 2,500,000 per worker.

Last reviewed 13 June 2026 · Sri Lanka guide

![Warm late-afternoon light over the Colombo waterfront and Galle Face Green with the city skyline behind.](/images/country-guides/sri-lanka-termination-severance.webp)

Illustration · Colombo, Sri Lanka

Answer.cite this

Sri Lanka does not let you fire a covered worker on notice alone. You need the worker's written consent, or the Commissioner of Labour's written approval first. This applies once you employ 15 or more workmen ([TEWA No. 45 of 1971](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html)).

There is no fixed notice period in the law. The Act sets no day count. The Commissioner decides the compensation, using a formula published by gazette, capped at LKR 2,500,000 per worker.

Gratuity is separate and on top. After 5 completed years, monthly-paid staff earn 0.5 months of pay for each year of service. A worker can also ask a Labour Tribunal to review the dismissal.

## What approval do you need to terminate in Sri Lanka?

You need one of two things before you terminate. Either the worker agrees in writing, or the Commissioner of Labour approves it first. There is no third route for a covered worker.

This applies once you employ 15 or more workmen, measured as a six-month average. Smaller employers sit outside the regime ([TEWA No. 45 of 1971, s.3](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html)).

The [Termination of Employment of Workmen (Special Provisions) Act No. 45 of 1971](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html), known as TEWA, governs non-disciplinary termination. Section 2(1) bars an employer from terminating a covered worker without the worker's prior written consent, or the prior written approval of the Commissioner of Labour. Misconduct dismissals follow a separate disciplinary route, but a redundancy or business-reasons exit runs through this gate.

### Who the rule covers

| Situation | What applies |
| --- | --- |
| Employer of 15+ workmen (six-month average) | Worker's written consent or Commissioner's written approval required |
| Worker with 180+ days of service | Covered by the TEWA approval regime |
| Employer below the 15-workmen line | Outside TEWA; contract terms and general labour law apply |
| Disciplinary dismissal for proven misconduct | Separate route; a Labour Tribunal can still review it |

The Act fixes no notice period in days. Where TEWA applies, you cannot substitute pay for the approval. You either secure consent or you apply to the Commissioner, who decides whether the termination stands and what compensation is owed.

1. Check if TEWA applies Confirm you employ fifteen or more workmen on a six-month average and the worker has the service that brings them under the Act. If you sit below the line, the contract and general labour law govern instead.
2. Seek written consent first The cleanest route is the worker's genuine written consent to the termination. Recorded properly, it satisfies the Act and removes the need to apply to the Commissioner.
3. Apply to the Commissioner Where there is no consent, apply to the Commissioner of Labour with the business reason, the roles affected, and the proposed terms. The Commissioner may hold an inquiry before deciding.
4. Calculate gratuity and dues Work out statutory gratuity for eligible staff at the last-drawn rate, plus wages and accrued leave to the last working day. Track any compensation the Commissioner orders against the published cap.
5. Settle the fund accounts Process the Employees' Provident Fund and Employees' Trust Fund settlement on exit. Pay the final contributions through the funds and confirm the worker's balance is released.

## How much notice must you give a Sri Lanka employee?

The law sets no fixed notice period for a covered termination. TEWA replaces notice with the approval gate. Notice in days comes from the contract, not the statute.

Sources differ on customary notice by tenure, and the primary law does not confirm a day count. So treat any notice schedule as a contract term, and rely on the approval process for the legal protection.

This is where Sri Lanka diverges from most countries. There is no statutory notice ladder that scales with service. For a covered worker, the protection is the approval requirement, not a notice period. The [TEWA Act](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html) sets no day count, and our compliance research could not confirm a notice schedule against primary statute, so we do not publish one.

### What the contract usually carries

Employment contracts and letters of appointment commonly state a notice period for resignation and for non-TEWA exits. One to three months is widely used for salaried roles, but that is a contract term, not a legal floor. Where TEWA applies, paying out a contractual notice does not remove the need for consent or Commissioner approval.

### Final pay

Wages owed up to the last working day are due in the normal pay run. The standard pay cycle is monthly for shop and office staff. Gratuity and any Commissioner-ordered compensation are calculated and paid separately, as set out in the sections below.

## How is Sri Lanka severance and gratuity calculated?

Two payments can apply. TEWA compensation, set by the Commissioner, and statutory gratuity, set by a separate Act. They are different things and can both be owed.

Gratuity is the predictable one. After 5 completed years, monthly-paid staff get 0.5 months of last-drawn pay for each completed year ([Payment of Gratuity Act No. 12 of 1983](https://lankalaw.net/wp-content/uploads/2025/02/1983Y0V0C12A.html)).

TEWA compensation has no fixed formula in the Act itself. Section 6D delegates the formula to the Commissioner of Labour, who publishes it by gazette order. The Commissioner sets the amount when approving a termination, and the published cap is LKR 2,500,000 per worker, raised from LKR 1.25 million by an extraordinary gazette in 2021 ([Commissioner's gazette order under TEWA](https://www.desaram.com/cap-on-compensation-awarded-by-commissioner-of-labour/)).

### Statutory gratuity

Gratuity runs on its own track under the [Payment of Gratuity Act No. 12 of 1983](https://lankalaw.net/wp-content/uploads/2025/02/1983Y0V0C12A.html). It is owed by employers of 15 or more workmen, to staff with not less than 5 completed years of service.

| Worker type | Gratuity per completed year |
| --- | --- |
| Monthly-rated | 0.5 months of last-drawn wage or salary |
| Daily or piece-rated | 14 days of last-drawn wage or salary |

Gratuity uses the last-drawn rate, so a long-serving senior employee can build a sizeable entitlement. It is paid whether the exit is a resignation, a retirement, or an employer-led termination, once the five-year service bar is cleared. TEWA compensation and gratuity are computed separately and a worker may receive both.

### Provident and trust fund settlement

On exit, the worker's Employees' Provident Fund balance is settled through the fund. Throughout employment the employer pays 12% of earnings to EPF and the worker contributes 8%, with a further 3% paid by the employer to the Employees' Trust Fund ([EPF Act No. 15 of 1958](https://epf.lk/?page_id=2)).

## Are there extra rules for group exits in Sri Lanka?

The same approval gate scales to groups. Every covered worker in a group exit needs consent or the Commissioner's approval. There is no separate collective-redundancy track with its own headcount trigger.

The Commissioner reviews the business case for the whole group. Approval can be refused, granted, or granted with a compensation order per worker.

Department of Labour, Sri Lanka · TEWA No. 45 of 1971, s.2

An employer of 15 or more workmen may not terminate a covered worker without the worker's prior written consent or the prior written approval of the Commissioner. The Commissioner fixes the compensation by gazette formula, capped at LKR 2,500,000 per worker.

Source: [Department of Labour, Sri Lanka, Labour Legislations](https://www.labourdept.gov.lk/index.php?option=com_content&view=article&id=85&Itemid=126&lang=en)

For a workforce reduction, you apply to the Commissioner of Labour with the reasons, the roles affected, and the proposed terms. The Commissioner can hold an inquiry before deciding. This is an authority approval, not a fixed-window consultation like the schemes in the UK or France, so the timeline depends on the Commissioner's process rather than a set number of days.

### What an application typically covers

- The business reason for the reduction
- The number and categories of workmen affected
- The selection method used
- The proposed compensation per worker
- Any alternatives to termination that were considered

Terminating a covered worker without consent or approval is not valid. The worker can pursue reinstatement or compensation through the Commissioner's process or a Labour Tribunal, so the approval step is the one to get right.

## Can you agree a mutual exit in Sri Lanka?

Yes, and it is the cleanest route. A worker's prior written consent to the termination satisfies TEWA on its own. No Commissioner approval is needed when genuine consent is in place.

The consent must be real and recorded in writing. A well-drafted settlement sets out the exit date, the payments, and any waivers both sides agree.

TEWA gives written consent equal standing to Commissioner approval. So a properly documented mutual exit removes the need to apply to the authority. This makes the settlement agreement the practical heart of most planned departures in Sri Lanka.

Typical components of a Sri Lanka mutual exit:

- **Written consent to termination**, recorded clearly so it satisfies the TEWA requirement
- **Gratuity**, where the worker has the 5 completed years, at 0.5 months of pay per year for monthly-rated staff
- **Wages and accrued leave**, paid up to the last working day
- **Agreed ex gratia amount**, if the parties want one above the legal floor
- **Provident and trust fund settlement**, processed through EPF and ETF
- **Reference wording**, agreed in advance and attached

Note on timing. The law does not fix a set number of days after exit for all final dues. Wages run through the normal monthly cycle, and gratuity is settled on exit. Get the written consent signed before the last day, so the termination is valid from the start and there is no later dispute over the route taken.

## How Teamed runs Sri Lanka terminations

Teamed is your legal [employer of record](/lp/employer-of-record) in Sri Lanka. The cost is [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency. Every termination runs through Teamed's Sri Lanka operations team.

We manage the consent or Commissioner approval route, the gratuity maths, and the EPF and ETF settlement. All of it runs on **one platform**. The decision on who to let go, and why, is always yours.

**Real HR and legal experts** handle your Sri Lanka hires, from the first letter of appointment through every monthly payroll run and statutory deduction. **An actual person**, not a chatbot or a pooled queue. There is **no setup fee** and **no exit fee**, and employer cost **passes through at cost, itemised** on every invoice.

The split of responsibilities under EOR for Sri Lanka terminations:

| What Teamed handles | What the client decides |
| --- | --- |
| Securing written consent, or preparing the Commissioner of Labour application | Whether to end the role, why, and on what timeline |
| Gratuity at 0.5 months per completed year for monthly-rated staff | Whether to offer terms above the legal floor |
| Tracking the LKR 2,500,000 compensation ceiling on any Commissioner order | Performance standards and what counts as misconduct |
| EPF and ETF settlement at 12%, 8% and 3% | Communication with the wider team |
| Final wages and accrued leave to the last working day | Reference wording and any waivers in a mutual exit |

Sri Lanka has no fixed consultation window. But the consent-or-approval gate is real and a termination without it is not valid. Teamed tracks that requirement on every covered exit.

EOR, contractors, and entity employees all live on **one platform**. An employee hired through Teamed's Sri Lanka network can **graduate** to your own Sri Lankan legal presence when headcount makes entity formation the right call, **until it isn't**. Run the [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator) to see when the model flips. Start from the [Sri Lanka hiring overview](/country-hiring-guides/sri-lanka).

Key sources: [TEWA No. 45 of 1971](https://www.srilankalaw.lk/revised-statutes/alphabetical-list-of-statutes/1285-termination-of-employment-of-workmen-special-provisions-act.html), [Payment of Gratuity Act No. 12 of 1983](https://lankalaw.net/wp-content/uploads/2025/02/1983Y0V0C12A.html), and the [Department of Labour, Sri Lanka](https://www.labourdept.gov.lk/index.php?option=com_content&view=article&id=85&Itemid=126&lang=en).

## Frequently asked questions

Do you need government approval to terminate in Sri Lanka?

For a covered worker, yes. Under the Termination of Employment of Workmen (Special Provisions) Act No. 45 of 1971, an employer of 15 or more workmen cannot terminate without the worker's prior written consent or the prior written approval of the Commissioner of Labour. There is no notice-only route. Smaller employers fall outside the Act and follow the contract and general labour law.

How much severance must you pay in Sri Lanka?

There is no fixed statutory severance formula in the Act. The Commissioner of Labour sets compensation case by case, using a formula published by gazette, up to a cap of LKR 2,500,000 per worker. Statutory gratuity is separate and can be owed on top: after 5 completed years, monthly-rated staff earn 0.5 months of last-drawn pay per completed year.

What notice period applies in Sri Lanka?

The law sets no fixed notice period for a covered termination. TEWA replaces a notice ladder with the consent-or-approval requirement. Any notice in days comes from the employment contract, commonly one to three months for salaried roles, which is a contract term rather than a legal minimum. Paying out contractual notice does not remove the need for consent or Commissioner approval.

Who can challenge a dismissal in Sri Lanka?

A workman, or a trade union on the member's behalf, can apply in writing to a Labour Tribunal for relief over the termination of their services under the Industrial Disputes Act No. 43 of 1950. The tribunal makes the order it considers just and equitable, which can be reinstatement or compensation, with no fixed statutory cap on the award.

How is statutory gratuity calculated in Sri Lanka?

Under the Payment of Gratuity Act No. 12 of 1983, an employer of 15 or more workmen owes gratuity to staff with not less than 5 completed years of service. Monthly-rated workers get 0.5 months of last-drawn pay for each completed year. Daily or piece-rated workers get 14 days of last-drawn pay per completed year.

Is a 13th-month salary required in Sri Lanka?

No. There is no statutory 13th-month salary or festival bonus law for private-sector employees in Sri Lanka. Any bonus is contractual or set by a collective agreement, not required by law. Mandatory employer costs centre on the Employees' Provident Fund at 12% and the Employees' Trust Fund at 3%.

Teamed Legal Operations

The biggest Sri Lanka termination mistake we see is treating it like a notice-period country. It is not. For a covered worker you need consent or the Commissioner's approval first, and paying a notice period does not change that. Skip the gate and the termination simply is not valid.

A note from Tom Price-Daniel

In Sri Lanka you cannot fire a covered worker on notice. You need their written consent or the Commissioner of Labour's approval first.  
Most employers expect a notice ladder. There isn't one. The protection is the approval gate.  
Get it wrong and the exit is not valid, with compensation reaching LKR 2,500,000 per worker.  
Know the route before you start the conversation.

Tom Price-Daniel · Co-founder, Teamed

## Related Sri Lanka guides

- [Hiring in Sri Lanka, overview](/country-hiring-guides/sri-lanka)parent
- [Canada termination and severance](/country-hiring-guides/canada/termination-and-severance)neighbour
- [UK termination and severance](/country-hiring-guides/united-kingdom/termination-and-severance)neighbour
- [Employer of Record overview](/lp/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [EOR vs Entity Crossover Calculator](https://www.teamed.global/tools/crossover-calculator)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction, so verify current requirements with the relevant authorities, the Department of Labour, Sri Lanka and the Inland Revenue Department, or speak to a qualified professional before relying on any specific framework. The Commissioner of Labour's compensation formula and cap are set by gazette order and have been revised before, most recently in 2021. Monitor the Department of Labour and the Gazette for any new order that changes the cap or the formula.