A foreign company that terminates a Moroccan employee, whether hired directly, through an umbrella company, or through an Employer of Record, runs into the same question every time: how much is actually owed? In Morocco, the answer is not a matter of negotiation. It follows a fixed scale set by the Labour Code, and it can be calculated in a few minutes once the formula is clear.
Severance pay in Morocco is calculated in hours of salary per year of seniority: 96 hours a year for the first five years, 144 hours from year six to year ten, 192 hours from year eleven to year fifteen, then 240 hours beyond that. The hourly rate is the average gross monthly salary over the last 52 weeks, divided by 191 hours (articles 53 and 55 of the Labour Code, Law 65-99).
Who is entitled to severance pay in Morocco
Three conditions must all be met for statutory severance to apply. First, a permanent contract: a fixed-term contract reaching its normal end does not trigger severance, unless the employer ends it early without justification. Second, at least six months of continuous seniority with the same employer. Third, a termination reason that does not qualify as serious misconduct under articles 39 and 61 of the Labour Code.
Serious misconduct changes everything. Theft, prolonged unexplained absence, assaulting a colleague or a client: in the cases listed under article 39, the employee loses both the notice period and severance pay. It is the only situation where an employer can end a permanent contract without owing anything beyond the standard final settlement, wages due and unused paid leave.
Economic redundancy (articles 66 to 71), by contrast, still triggers statutory severance, on the same basis as a termination for a non-disciplinary personal reason. What changes are the procedural obligations placed on the employer beforehand: consulting staff representatives, notifying the labour inspectorate at least 60 days ahead, and exploring alternatives such as reduced working hours. The severance amount itself follows the exact same scale as an individual dismissal.
The article 53 scale: how the calculation works
The calculation runs in two steps. First, work out the reference hourly rate: average gross monthly salary over the last 52 weeks, including regular bonuses and benefits, divided by 191, the legal monthly working hours (44 hours a week). Second, apply the scale by seniority bracket.
| Seniority | Rate in hours per year |
|---|---|
| 1 to 5 years | 96 hours |
| 6 to 10 years | 144 hours |
| 11 to 15 years | 192 hours |
| Beyond 15 years | 240 hours |
The scale is progressive, not linear. An employee with 12 years of seniority does not simply multiply 12 by 192 hours. The calculation stacks the brackets: 5 years at 96 hours, plus 5 years at 144 hours, plus 2 years at 192 hours. That tiered logic is why two employees separated by only two years of seniority can end up with very different payouts once they cross the 10 or 15 year threshold (source: articles 53 and 55, Moroccan Labour Code, Law 65-99).
Worked example: three profiles, three payouts
Take a maintenance technician in Tangier, gross salary MAD 6,000, 4 years with the same manufacturing employer. Hourly rate: 6,000 divided by 191, about MAD 31.41. Severance: 4 times 96 times 31.41, roughly MAD 12,060.
Second case, a logistics manager in Casablanca, gross salary MAD 10,000, 8 years of seniority. Hourly rate of MAD 52.36. She stacks 5 years at 96 hours (MAD 25,130) and 3 years at 144 hours (MAD 22,620), for a total around MAD 47,750.
Third case, a senior manager in Rabat, 18 years of seniority, gross salary MAD 25,000. The calculation runs through all four brackets and lands around MAD 377,000, roughly fifteen to sixteen months of gross salary.
| Gross monthly salary | 4 years | 8 years | 18 years |
|---|---|---|---|
| MAD 6,000 | about MAD 12,060 | about MAD 28,650 | about MAD 90,500 |
| MAD 10,000 | about MAD 20,100 | about MAD 47,750 | about MAD 150,800 |
| MAD 25,000 | about MAD 50,260 | about MAD 119,380 | about MAD 377,000 |
These figures are statutory minimums. A collective bargaining agreement or an individual contract can set a higher amount, and that more favorable term applies instead of the article 53 scale.
Unfair dismissal: a separate payout, calculated differently
Unfair dismissal is a distinct category from statutory severance. It applies when termination lacks a real and serious cause, or when the disciplinary procedure, prior notice, a hearing held within 8 days of the alleged misconduct, and a decision notified within 48 hours, was not followed. In that case, a labour court can award, on top of statutory severance, damages equal to 1.5 months of salary per year of seniority, capped at 36 months (article 41). The employee has 90 days from notification to file a claim with the court of first instance, labour section.
And here is a technical point that trips up a lot of online calculators: unlike statutory severance, which is calculated on gross salary, unfair dismissal damages are calculated on the actual net salary received, under settled case law from Morocco's Court of Cassation. Mixing up the two bases is a common and costly error.
Tax treatment in 2026: the MAD 1,000,000 exemption cap
Since the 2023 Finance Law, every termination payment, statutory severance, unfair dismissal damages, and amicable settlement combined, is exempt from income tax up to a combined ceiling of MAD 1,000,000 (General Tax Code, article 57-7). Beyond that ceiling, the excess is taxed at the progressive income tax rate. On the social security side, statutory severance also stays exempt from CNSS and AMO contributions within the limits set by the article 53 scale.
Take an employee who receives MAD 400,000 in statutory severance and MAD 300,000 in negotiated settlement damages. The combined MAD 700,000 stays under the million-dirham threshold, so the whole amount is tax-exempt. That is a real change from the pre-2023 rule, when statutory severance was fully exempt with no cap at all.
Termination and unemployment: the IPE safety net
An employee terminated for economic reasons, or reaching the end of a permanent contract outside serious misconduct, can also apply for the Unemployment Benefit Allowance (IPE), managed by CNSS since December 2014 (Law 03-14). It pays 70 percent of the average salary over the last 36 months, capped at the current monthly minimum wage, MAD 3,422.72 since January 2026, for a maximum of six months. Conditions: 780 days of CNSS contributions, including 260 within the last twelve months, a claim filed within 60 days of contract end, and active registration with ANAPEC, the national employment agency.
The amount is modest next to severance pay itself. But it bridges the gap during a job search, and many Moroccan employees never claim it simply because no one told them it existed.
What this means for umbrella company and EOR arrangements in Morocco
A professional engaged through an umbrella company in Morocco usually signs a permanent contract with the umbrella firm, not a fixed-term one renewed assignment after assignment. In practice, that means a termination initiated by the umbrella company follows this exact article 53 scale, calculated on the gross salary the umbrella firm pays out.
For a foreign company hiring through an Employer of Record, severance pay belongs on the list of end-of-contract costs to budget for from day one, alongside the CNSS employer contributions covered in our breakdown of real EOR cost in Morocco. A serious provider plans for this exposure rather than discovering it at termination time. Morocco's minimum wage, which sets the legal salary floor, also works as a low-end reference for estimating the minimum payout owed to a junior hire at the end of a long assignment.
Before signing an umbrella company agreement or an EOR contract, check that termination terms and the severance calculation method are spelled out in writing. A reliable provider documents this without being asked twice, and builds it into the fee structure rather than surfacing it as a surprise charge at termination.