The recently assented Employment (Amendment) Act, 2025 significantly reshapes Uganda’s legal framework on termination and dismissal. The amendment codifies key judicial principles into statutory obligations, expands the lawful grounds for termination, codifies procedural and substantive fairness requirements, and increases the compensatory exposure for unfair dismissal. The key developments are highlighted below.
1. Termination
The amendment has added three new grounds for termination, that is, ‘redundancy’, ‘prolonged sickness exceeding six months rendering the employee incapable of performance’, and ‘circumstances where continued employment would result in breach of a statutory obligation’(Section 64).
On redundancy cases, the employer must show proof of either cessation of business operations or operational reorganisation through labour-saving devices, changes in work patterns, or reduced workforce requirements. Mere references to “restructuring” will not suffice. Courts will require documentary evidence supporting the redundancy decision, including a business case with a justification for the redundancy decision.
In cases of sickness, the amendment establishes a structured regime of full pay for the first two months, half pay for the following four months, and termination thereafter only where the incapacity persists and all contractual obligations have been satisfied up to the date of termination.
2. Severance
The amendment also introduces a mandatory severance entitlement of one month’s salary for each completed year of service on redundancy termination cases.
3. Dismissal
The amendment offers a revised definition as to what amounts to a dismissal, replacing the previous ‘verifiable misconduct’ test (Sections 2 and 64A). An employer may now dismiss an employee only on specified grounds, that is, abscondment from duty for more than thirty consecutive days without permission; forged documents or lack of qualifications at recruitment; conduct likely to adversely affect the employer’s business; or any other ground expressly provided for in the contract of employment.
The amendment therefore increases the importance of carefully drafted employment contracts, as clearly defined misconduct provisions may provide an enforceable contractual basis for dismissal within the statutory framework.
4. Procedural & Substantive Fairness
Procedural fairness now requires the employer, before dismissal, to explain the reasons in a language the employee understands, allow the employee to be accompanied by a person of their choice, and consider any representations made. The employee must be granted five working days to prepare, removing prior uncertainty on “reasonable time”, with non-compliance attracting liability of four weeks’ net pay regardless of substantive justification (Section 65).
On substantive fairness, the Act confines dismissal to the prescribed statutory grounds (sections 2 and 64A). Any dismissal outside these grounds will be rendered unfair (section 65A). The amendment also recognises wrongful dismissal arising from breach of contract (Section 65B), and prohibits dismissal on protected grounds including pregnancy, lawful leave, union membership, protected characteristics, initiation of legal proceedings, or temporary absence on valid grounds (Section 65C).
5. Redress and Compensation
The amendment under section 70 provides a three-month limitation period for lodging dismissal complaints with a labour officer, extendable where just and equitable. It also increases the basic compensatory award for unfair dismissal to eight weeks’ wages from four, with additional compensation of one to three months’ pay (Section 77). This materially increases employer exposure in defective dismissals.
6. Practical Lessons for Employers
Overall, the reforms reflect a shift towards structured employment protections and heightened procedural accountability, requiring proactive compliance to manage risk and employee exits
