A contract of employment can be terminated by any party at any time. This can be done in the following ways:

1. Mutual agreement
Mutual agreement derives from the doctrine of freedom of contract. The parties to the contract merely agree to end the contract of employment. The agreement must be clear and voluntary. It should not be forced by any party.

2. Lapse of time (Effluxion of time)
If a contract specifies the duration for which the employer-employee relationship is to subsist, the contract terminates upon the lapse of such time. Where there is no reference to time or the employment is described as permanent & pensionable without age of retirement being specified, the duration of contract of employment is determined through reasonable interpretation of the contract which is dependent on the custom or usage of the job in question, for example; for the civil servant the period is 60 years.

3. By Notice
Contracts of employment have provision for notice period within which either party to the contract may intimate to the other his/her desire to terminate the contract. Upon expiry of such notice period the contract terminates. In lieu of such notice, the party terminating the relationship may pay the other the equivalent of such salary as would be earned over notice period. The idea is that the other party is given time to adjust without interruption. In cases where the contract is silent on the question of termination by notice, a term will be implied at common law to make provision for it. The principal function of notice rule is to give both sides an opportunity of leaving employer-employee relationship at no cost. The length of notice may be set so as to grant one or both parties some degree of monetary compensation for the ending of the relationship. Section 35 of the Employment Act specifies on the periods of notice where a contract of service is one not involving performance of specific work or it is without reference to time.

4. Frustration
This arises where there is fundamental change of circumstances. At common law a contract discharged by frustration is terminated automatically regardless of opinion or knowledge of parties concerned. That position was adopted in the case of Hirji Mulji –vs- Cheong Yue SS Co. Ltd (1926) AC.497.
Supervening events that could frustrate a contract are death of a party, imprisonment, bankruptcy of employer and liquidation. It is an established principle of law that a contract will not be frustrated by supervening events if parties had made provision for that event in the contract.

5. Redundancy
This arises due to closure of place of work or enterprise or where excess labour in enterprise is laid off for economic reasons. In such event the employer is liable to make redundancy payment to the employee, which is calculated by reflection to employee’s security, salary level and age. Section 40 of the Employment Act provides for conditions that an employer has to comply with if he has to terminate the employment of an employee on account of redundancy.

6. Dismissal
An employer may dismiss an employee for just cause and where that is not so the employer may be liable for damages for unlawful or wrongful dismissal or unfair termination. Section 44(3) of the Employment Act empowers an employer to dismiss an employee summarily i.e. without notice, when the employee has by his conduct indicated that he has fundamentally breached his obligations arising under the contract of service.