The rising cost of non-compliance in Uganda’s employment
Uganda’s Employment (Amendment) Act, 2026, marks a major shift in labour regulation, increasing termination costs, standardising severance entitlements and strengthening employer liability for workplace harassment, writes Bruhan Mugaino
Bruhan Mugaino. (Courtesy)
________________
OPINION
By Bruhan Mugaino
Uganda’s Employment (Amendment) Act, 2026, which commenced on June 5, 2026, marks the most significant recalibration of the country’s employment framework since the principal Act of 2006.
For boards and chief executives of leading Ugandan enterprises, the reforms are less a collection of incremental HR updates than a material shift in the allocation of workforce risk—one that elevates termination costs, standardises previously discretionary entitlements and introduces or strengthens criminal liability for workplace conduct.
The changes align Uganda more closely with international labour standards, including International Labour Organisation norms on violence and harassment, and reflect a broader global trajectory in which employment law is increasingly treated as a core component of human capital governance, ESG accountability, and personal exposure for senior management.
The commercial implications are immediate. Basic compensation for unfair dismissal has doubled to eight weeks’ wages, with additional awards of one to three months’ pay available at the labour officer’s discretion. Severance, previously shaped largely by contract and negotiation, is now fixed at one month’s salary for each completed year of service in the circumstances where it is payable, including redundancy and certain terminations on grounds of incapacity.
For a cohort of 200 employees averaging five years’ service and monthly pay of sh1.5m, the indicative severance exposure alone approaches sh1.5b, before notice, accrued leave or any unfair-dismissal uplift.
Employees with ten or more years’ service are entitled to three months’ notice. These figures sit against the backdrop of a labour market in which, according to the Uganda Bureau of Statistics Labour Market Survey 2025, only 10.8% of employment is formal (89.2% informal overall; 87.6% excluding agriculture), with approximately 11.8 million people employed and labour under-utilisation at 41.6%.
Workplace conduct
Criminal exposure has also expanded. All employers, irrespective of workforce size, must now take measures to prevent sexual harassment and must display those measures conspicuously. A new section criminalises intimidation and harassment by an employer or its agents, covering a wide range of written, verbal and physical conduct that creates a hostile environment. First-instance fines for general contraventions reach sh10m; subsequent convictions can attract fines of up to sh14m, imprisonment of up to seven years, or both.
In the recruitment and externalisation space, responsible officers of agencies face personal liability for certain breaches. This development mirrors trends visible in other jurisdictions, most notably the progressive strengthening of employer duties to prevent workplace harassment (including third-party harassment in some markets) and the imposition of personal accountability on those who control corporate decision-making.
A recent example
The Industrial Court’s recent jurisprudence underscores that procedural formality alone will not suffice. In Onenchan N. Ronald v Postbank Uganda Limited (Labour Dispute Reference No. 284 of 2021, [2026] UGIC 84, August 31, 2026), the Court held that a redundancy exercise was both procedurally and substantively unfair.
Relabeling a role as part of a restructuring did not establish genuine redundancy where the employer failed to demonstrate that the re-profiled position was materially different, to give adequate prior notice and meaningful consultation, or to comply with statutory and internal notice requirements. Payment in lieu of notice did not cure the defects.
The decision is consistent with the Court’s established approach: a reasonable-employer test applies to substantive fairness, but failure to follow prescribed procedures or internal policy renders a dismissal procedurally unfair regardless of the underlying commercial rationale.
The judgment arrived shortly after the Amendment Act codified redundancy as a statutory ground for termination and required 30 days’ notice to the Labour Commissioner for intended redundancies; reinforcing that boards cannot treat restructuring as a purely managerial exercise insulated from legal scrutiny.
Casual employment
Leading corporates that rely on extended casual or piecework models in their operations or supply chains will face rising compliance costs and greater exposure to claims; those that proactively formalise and document genuine task-based arrangements may gain a competitive advantage in talent retention and regulatory standing. Severance and unfair-dismissal costs will increasingly feature in restructuring models and capital planning.
Boards that continue to treat redundancy exercises as primarily commercial decisions, without documented business cases, meaningful consultation, and statutory notice, are likely to encounter the same judicial scrutiny seen in Onenchan and related Industrial Court decisions. Given the Court’s existing backlog (with reports of several thousand pending matters and high proportions of older cases) and limited specialist capacity, early settlement and robust procedural compliance will remain more efficient than contested litigation for most employers.
A core governance issue
On harassment and intimidation, the combination of expanded criminal liability, the duty on all employers and global ESG expectations around workplace conduct is likely to drive greater board-level oversight, increased investment in training and investigation protocols, and more frequent inclusion of human-capital metrics in risk registers and external reporting.
Personal liability for responsible officers, already explicit in the recruitment-agency provisions and implicit in broader enforcement trends, will encourage clearer lines of accountability and documented decision-making. In the externalisation and migrant-worker segments, tighter licensing and job-order requirements will favour well-capitalised, compliant operators and raise barriers for smaller or less formal players.
For individual leaders, the practical trajectory is one of elevated personal and enterprise exposure. CEOs and boards that integrate the new statutory formula for severance, the expanded dismissal procedures and the harassment framework into enterprise risk management, provisioning and supply-chain due diligence will be better positioned to manage both balance-sheet impact and reputational risk.
Those that confine the response to an HR policy update risk underestimating the cumulative cost of non-compliance in a market that is simultaneously formalising and aligning more closely with international labour standards. The statute has moved the dial; the organisations that treat workforce risk as a core governance issue rather than a residual operational matter will be those best placed to navigate the next phase of Uganda’s labour-market evolution.
The writer is a senior associate and the head of the Employment and Labour Practice Group of AB & David Africa Uganda office.
Email: bruhan.mugaino@abdavid.com