Severance in the Dominican Republic is an economic assistance that employers must pay to workers when the employment contract ends for reasons not attributable to the latter, in accordance with Article 80 and subsequent provisions of the Labor Code. This compensation, which is of a contingent nature, depends on the length of service and must be claimed within two months after the termination of the contract.
Currently, severance is at the center of the debate surrounding the modernization of the Labor Code. Among the proposals is that of the Ombudsman, Pablo Ulloa, who suggests the creation of a General Severance Assistance Fund. This fund would be financed by an initial capital sourced from the surpluses and redistribution of resources from the Dominican Institute for the Prevention and Protection of Occupational Risks (IDOPPRIL), along with recurring employer contributions equivalent to 2% of the worker’s monthly salary.
This proposal aims to support micro, small, and medium-sized enterprises (MSMEs) in paying labor benefits, ensuring compensation for workers without compromising business stability.
However, this initiative has been criticized by labor unions such as the Unión Clasista de Trabajadores (UCT), who oppose the use of IDOPPRIL funds to finance severance, arguing that it diverts resources intended to protect workers’ health. They advocate that, if this social right is to be modified, it should only be for its enhancement.
In contrast, the Association of Industries of the Dominican Republic (AIRD) has proposed a dual model for severance: maintaining the current regime for existing contracts and limiting benefits under new contracts. Their goal is to promote formal employment, attract private investment, and facilitate the creation of 350,000 new formal MSMEs by 2028.
Internationally, the International Labour Organization (ILO) has established standards such as Convention No. 158, which requires valid grounds for dismissal and ensures appropriate compensation. In Europe, the European Social Charter protects the right to fair severance pay. Additionally, countries like Chile have implemented unemployment insurance systems that combine individual accounts with state funds to support unemployed workers.
The Dominican debate underscores the need to balance worker protection with business competitiveness. It is emphasized that any reform must respect fundamental rights, promote formal hiring, and ensure the sustainability of the system, in line with international standards and the sustainable development goals.
References:
- AIRD: Severance Adjustment Should Be Part of Labor Reform. (2024, October 10). AIRD. https://aird.org.do/es/prensa/2024/aird-ajuste-de-la-cesantia-debe-ser-parte-de-la-reforma-laboralEl Día+7aird.org.do+7Diario Libre+7
- Carlos Hernández Contreras (2008). Dominican Labor Jurisprudence During the 20th Century, Dominican Republic 2008, and Glossary of Topics for Searches in the Labor Code. QmiKpjZja5qb156WbP4mMDyHekLfqvDfzS8F4r3d.pdf
- Dominican Republic Labor Code. (1992). Retrieved from https://docs.republica-dominicana.justia.com/nacionales/codigos/codigo-de-trabajo.pdf
- Ombudsman Proposes Assistance Fund Instead of Severance. (2025, March 12). Diario Libre. https://www.diariolibre.com/politica/congreso-nacional/2025/03/12/defensor-del-pueblo-propone-fondo-de-auxilio-en-vez-de-cesantia/3031311Diario Libre
- Supreme Court to Decide on Severance Compensation Before Year-End. (2024, November 28). El País. https://elpais.com/economia/2024-11-28/el-supremo-decidira-sobre-la-indemnizacion-por-despido-antes-de-final-de-ano.htmlEl País
- International Labour Organization (ILO). (1982). Convention Concerning Termination of Employment at the Initiative of the Employer (No. 158). https://www.ilo.org/dyn/normlex/es/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C158
- Union Leaders Reject Pablo Ulloa’s Severance Proposal. (2025, March 16). Diario Libre. https://www.diariolibre.com/economia/empleo/2025/03/16/sindicalistas-rechazan-sugerencia-de-pablo-ulloa-sobre-cesantia/3035921Diario Libre
- Superintendence of Pensions of Chile. (2007, December). Unemployment Insurance in Chile: Five Years of Operation. Retrieved from https://www.spensiones.cl/portal/institucional/594/articles-4038_pdf.pdfgob.cl+2
*** Russin, Vecchi & Heredia Bonetti provides this publication for general informational purposes only and it should not be considered legal advice for specific cases.
Written by:
Laurenys Santana Hilario
lsantana@rvhb.com
Attorney
