When losing a job, it’s not just a significant life change but also an economic one. An immediate question arises: how much am I entitled to as severance pay? In Spain, various types of dismissals or terminations of employment exist, which means the answer depends on the nature of the dismissal and how it occurred.
The Statute of Workers and the jurisprudence from the General Council of the Judiciary clearly establish when there is a right to severance pay and how it is calculated in each case.
What is Severance Pay?
Severance pay is a specific amount that a company must pay when it terminates an employment contract under certain circumstances. Its purpose is to compensate the worker for job loss when the termination is not due to their conduct or is mandated by law.
Not all dismissals entitle the employee to severance, nor do all severance payments have the same amount. Therefore, it’s vital to know how many days of pay per year are entitled based on each type of dismissal. For instance, a procedurally justified disciplinary dismissal does not generate severance pay, as it is linked to negligence or misconduct by the employee, while an unjustified dismissal or one due to objective causes does.
Types of Dismissal and Entitlement to Severance
Not all dismissals are equal, nor do they all provide the same right to severance pay. In order for there to be a right to severance, the termination of the employment relationship must be considered unjustified. This means that the dismissal lacks a justified cause according to the law.
When a company claims the termination was due to economic reasons or internal organization, a reduction is applied to the calculation of the severance amount, recognizing that while it is attributable to the company, the dismissal may be unavoidable for the company’s viability.
Severance Pay Breakdown
| Type of Dismissal | Is there Severance? | Basis for Severance |
|---|---|---|
| Justified Disciplinary Dismissal | No | No severance |
| Unjustified Disciplinary Dismissal | Yes | 33 days/year (max 24 months) |
| Dismissal due to Objective Causes | Yes | 20 days/year (max 12 months) |
| Collective Dismissal (ERE) | Yes | 20 days/year (minimum legal) |
| End of Temporary Contract | Yes | 12 days/year |
| Null Dismissal | No (Reinstatement) | Reinstatement and unpaid wages |
These categories respond to the reasons alleged by the company for terminating the contract and how the law qualifies them. However, to receive severance, one must always start from the premise of unjust termination. In other words, there needs to be insufficient reason for the dismissal.
How to Calculate Severance Pay
The calculation of severance pay is determined by labor regulations. Each type of dismissal has a set time frame, granting various days of pay based on the worker’s length of service and salary.
As a reference, the General Council of the Judiciary provides a useful calculator that, by entering the hiring date, dismissal date, and monthly gross salary, allows users to calculate severance amounts for various dismissal cases.
Severance calculations are always based on the regulatory salary (the salary used as a basis) and the time worked. This regulatory salary includes both the base salary and regular supplements, as well as the proportional part of extra payments if prorated. This means it’s a calculation of the actual wages received by the employee each month.
The daily salary is typically obtained by dividing the gross annual salary (including bonuses and prorated extra payments) by 365 days. Once this figure is obtained, it is multiplied by the days of severance per year worked as established by the applicable dismissal regulation.
Each type of dismissal has its own rules and severance models. Understanding these varying policies can ensure that employees know their rights and can assert them effectively in case of dismissal.