The Legal Nature of the Severance Pay in Work Relationships

The right to severance pay as one of the privileges of workers at the time of the termination of the employment contract since the year 1337 (SH) has entered to the Iranian legal system. Accordingly, at the end of the contract, the employer pays a lump sum to the worker. In this article, the legal nature and function of severance pay was examined by descriptive-analytic method and it recognized that the nature of this legal entity is not applicable to any existing legal entities and this institution is of a special and independent nature and its specific task is to help provide job security for workers and provide them with financial support in the event of unemployment. However, despite other legal measures such as the prohibition of unjustified dismissal to protect workers job security, severance pay is not enough to meet this purpose; it should be used as a means of financial support and income for unemployed workers and retirement through the creation of a special fund. This fund cans complete both the unemployment insurance and operates as second pillar of the pension system and compensates some of the financial problems of job seekers and retired people.