If you’re employing someone in Algeria through an Employer of Record (EOR), the first thing you need to understand is a hard constraint: you can’t terminate without cause. Algerian labour law doesn’t permit at-will or no-fault dismissal for permanent employees, and the EOR structure doesn’t create a workaround. Redundancy is also off the table under the EOR setup. Your options are termination for serious misconduct, a mutual termination agreement (MTA), or waiting out the natural expiry of a fixed-term contract. This guide walks through each route, the severance formula, notice obligations, and what has to be in the final settlement.
Termination options at a glance
The table below summarises the routes available to you as an employer operating through an EOR in Algeria.
| Termination type | Available under EOR | Notice required | Severance payable |
|---|---|---|---|
| Without cause (no-fault) | No | N/A | N/A |
| Redundancy | No | N/A | N/A |
| Serious misconduct (cause) | Yes | No (immediate) | No |
| Mutual termination agreement | Yes | Negotiable | Minimum 15 days/year of service (after 2 years) |
| Fixed-term contract: natural expiry | Yes | No | No |
| Fixed-term contract: early termination without cause | No | N/A | Potentially owed salary for remainder of term |
| During probation | Yes | No | No |
Probation period exits
Terminations during probation are the cleanest exit available in Algeria. Either party can end the employment relationship at any time during probation, without giving notice and without paying severance. No justification is required.
The maximum probation period under Algerian law is six months. It can be extended once by mutual written agreement, but the extension can’t exceed half the original probation duration. If an employee is on a three-month probation, the maximum extension is a further six weeks.
The only obligations on exit during probation are the standard ones that apply regardless of how employment ends: all wages earned to the termination date must be paid, along with any unused accrued annual leave. No special documentation is required beyond confirming the end date, though it’s good practice to put the termination in writing.
Termination for cause
This is the main route for ending a permanent contract in Algeria under the EOR setup. It applies where the employee has committed serious misconduct, and it requires both a substantive ground and a proper procedure.
What counts as serious misconduct
Algerian law sets a high bar for serious misconduct. Examples that typically meet it include unjustified refusal to carry out assigned duties, wilful damage to employer equipment, disclosure of confidential business information, consumption of alcohol or drugs in the workplace, criminal acts during or related to employment, and repeated insubordination after prior written warnings. A single performance issue or a minor procedural breach won’t qualify. The misconduct needs to be both serious and well-documented.
The dismissal procedure
Procedure matters in Algeria. Before issuing a termination letter, you need to run a disciplinary process. That means notifying the employee of the allegations in writing, giving them a fair opportunity to respond or present their case, and then making a documented decision. Skipping any step in this process is one of the most common reasons a just-cause dismissal gets overturned.
Once the process is complete, you issue a written dismissal letter. For serious misconduct, the termination can take effect immediately with no notice period. No severance is owed. You do still need to pay all wages accrued to the termination date and compensate any unused annual leave.
What you need on file
For cause-based dismissals, keep the following: the written dismissal letter, records of the disciplinary proceedings including any hearings or correspondence, the employee’s written response if one was provided, and the final settlement document itemising all payments made. These records are your defence if the employee challenges the dismissal through the labour inspection or a court.
Mutual termination agreement
A mutual termination agreement (MTA) is the most flexible exit route available under the EOR setup. Both parties agree in writing to end the employment relationship on negotiated terms. Because it requires genuine consent from the employee, it’s generally lower-risk than a contested cause-based dismissal.
How to structure the agreement
The MTA must be in writing and signed by both parties. It should specify the termination date, the notice period (which can be reduced or waived entirely by mutual agreement), and the financial settlement. There’s no fixed format, but the document needs to be clear and unambiguous about what each party is giving up.
Severance in a mutual termination
This is where the MTA gives you some room to negotiate. The statutory minimum severance for a mutual termination is 15 days’ gross salary per year of service, but only for employees with at least two years of service. Employees with fewer than two years aren’t entitled to the statutory minimum, though you can choose to offer something to secure their agreement. Parties can agree to pay more than the statutory minimum if that’s what it takes to reach a deal.
What can’t be waived
Even a fully negotiated MTA can’t waive the employee’s right to outstanding salary and accrued leave compensation. Those payments are mandatory regardless of what the agreement says. If the MTA purports to release those obligations, that release won’t be enforceable.
Severance formula
The statutory severance formula in Algeria applies to permanent (open-ended) contract employees who are dismissed for reasons other than serious misconduct and who have completed at least two years of service. It doesn’t apply to resignations, just-cause dismissals, or employees with less than two years on the job.
The formula
Severance is calculated at 15 days’ gross salary per year of service. The calculation base is the employee’s last gross monthly salary, including regular bonuses, or the average of the last 52 weeks of earnings, whichever produces the more favourable result for the employee. Collective agreements may set a higher rate, and those prevail if they do.
Worked example
An employee has 10 years of service and earns DZD 50,000 per month. The calculation runs as follows:
- 10 years x 15 days = 150 days of salary
- 150 days is approximately 5 months (150 / 30)
- 5 x DZD 50,000 = DZD 250,000 total severance
If the same employee’s contract is ended through a mutual termination agreement, the minimum you need to pay is DZD 250,000. You can agree more, but you can’t agree less.
Fixed-term contracts
Fixed-term contracts in Algeria work differently from open-ended ones, and the obligations on exit depend on how the contract ends.
Natural expiry
When a fixed-term contract reaches its agreed end date, the employment relationship terminates automatically. You don’t need to issue a separate termination notice, and no statutory severance is owed. You do still need to pay all outstanding wages and unused accrued annual leave by the last working day. It’s good practice to issue a written confirmation of the expiry date and provide the employee with their work certificate.
Early termination without cause
If you end a fixed-term contract before its agreed expiry date without a valid cause, the employee may be entitled to compensation equal to the salary they would have earned for the remainder of the contract term. If they’ve also completed two or more years of service, severance may apply on top of that. Early termination without cause on a fixed-term contract isn’t available under the EOR setup for the same reasons it isn’t available on permanent contracts.
Notice periods
Algerian law doesn’t fix a single statutory notice period that applies to all employment relationships. The standard in practice is 30 days, governed by the employment contract or any applicable collective agreement. Check both before calculating notice obligations for a specific employee.
For termination on grounds of serious misconduct, notice isn’t required. The dismissal can take effect on the day the disciplinary process concludes and the termination letter is issued. For all other terminations, the 30-day standard applies unless the contract specifies something different.
Payment in lieu of notice is permitted. If you’d rather the employee leave immediately, you can waive the working notice period and pay the equivalent of 30 days’ salary instead. This is common in practice and doesn’t create any additional liability.
If an employee resigns and fails to serve their notice period, you’re entitled to claim compensation from them equal to the salary for the notice period they didn’t work. In practice this is rarely pursued, but the right exists under Algerian law.
Final settlement
The final settlement is the payment package that closes out the employment relationship. Getting it right matters: late or incomplete settlements expose you to employee claims through the labour inspection or the courts.
What the final settlement must include
Every final settlement in Algeria must cover the following:
- All outstanding salary up to and including the termination date
- Compensation for all accrued but unused annual leave
- Severance, where it applies (serious misconduct and probation exits are excluded)
- Any other contractual benefits that haven’t been paid out
Timing
The settlement is due on the last working day or by the deadline specified in the employment contract or collective agreement. Don’t wait until after the termination date to start calculating. Run the numbers before you issue notice so the payment is ready to go when it’s due.
Consequences of late payment
If you miss the settlement deadline, the employee can claim interest on late payments and seek damages through the labour inspection or a court. Algeria’s labour courts take final settlement obligations seriously. A compliant EOR services provider handles settlement preparation and timing as part of the offboarding process.
Exit documentation
Algerian law and good practice require a specific set of documents to be issued to the employee on exit. Make sure all of the following are prepared before the termination date.
Work certificate: This document confirms the employment dates, job title, and role held. It’s a legal requirement in Algeria and the employee needs it for future employment or benefit claims. It shouldn’t include any performance assessment or commentary.
Final settlement document: An itemised statement of all payments made on exit, covering salary, leave compensation, severance, and any other amounts. This protects both parties in the event of a later dispute.
Written termination letter: Required for all cause-based dismissals. It should set out the grounds for dismissal and the effective date.
Signed MTA: For mutual termination, the signed agreement itself serves as the primary termination document.
Disciplinary records: For cause-based dismissals, retain all records from the disciplinary process. These should be kept securely and not shared with third parties.
Frequently asked questions
Can you dismiss a permanent employee in Algeria without giving a reason?
No. Algerian labour law doesn’t permit no-fault termination of permanent employees, and working through an EOR doesn’t change that. You need either a documented cause, a mutual agreement, or you need to wait for the expiry of a fixed-term contract.
Does the 15-day-per-year severance formula apply to all terminations?
No. Severance at this rate applies only to permanent contract employees dismissed for reasons other than serious misconduct, and only where the employee has at least two years of service. Employees dismissed for cause, employees who resign, and employees with under two years of service don’t receive it unless a higher rate is set by a collective agreement.
What happens if you skip the disciplinary process before a cause-based dismissal?
The employee can challenge the dismissal and is likely to succeed. Algerian courts treat procedural failure as a basis for overturning a just-cause dismissal even where the underlying misconduct was real. Always complete the disciplinary process, give the employee a chance to respond, and document everything before issuing the termination letter.
Can the final settlement be paid in instalments?
Not without the employee’s agreement. The default position is that all final settlement amounts are due on the last working day or the date set in the contract. Paying in instalments requires the employee’s written consent.
What’s the difference between a mutual termination agreement and a resignation?
A resignation is a unilateral act by the employee. An MTA is a bilateral agreement. The key practical difference is that an MTA allows both parties to negotiate the exit terms, including severance and the notice period, while a resignation gives the employer no control over timing beyond the notice period the employee is required to serve.
Managing a compliant termination in Algeria takes careful preparation, particularly around the disciplinary procedure and the final settlement timeline. RemotePass handles the full offboarding process for employers using its EOR in Algeria, from documentation through to final pay. Book a RemotePass demo to see how it works.
