Severance pay in Spain today
Calculating severance pay is one of the most important tasks a company faces. It is important that this settlement complies with current legislation in order to avoid fines and compensation, below we analyse what the current severance pay is in Spain and how it is applied.
How much is the severance pay?
Compensation for dismissal in Spain varies according to the type of dismissal and the regulations in force. It is important to differentiate between the different types of dismissal: unfair, objective and disciplinary.
- Unfair dismissal: This occurs when the dismissal is not justified or the correct legal procedure has not been followed. The compensation in this case is usually 33 days’ salary per year worked, with a maximum of 24 monthly payments. However, for contracts prior to the 2012 labour reform, a compensation of 45 days per year worked until the date of the reform is applied, and 33 days per year worked thereafter, with the same limit of 24 monthly payments.
- Objective dismissal: This is given for economic, technical, organisational or production reasons. The compensation is 20 days’ salary per year of service, with a maximum of 12 monthly payments. This type of dismissal requires a written communication to the employee, explaining the causes and 15 days’ notice.
- Disciplinary dismissal: In principle, it does not entail compensation, as it is understood that the dismissal is the result of the employee’s conduct. However, if the dismissal is declared unfair in legal proceedings, the same compensation as for unfair dismissal would apply.
It is essential to bear in mind that these amounts are gross and subject to the corresponding tax deductions. In addition, in the case of collective dismissals or EREs, there are specific regulations that may vary the conditions of compensation.
Furthermore, it is important for employees to know that they have the right to claim before the social jurisdiction if they consider that their dismissal has been unfair or unjustified, and thus be able to negotiate compensation or even reinstatement in the job.
Compensation for dismissal in Spain depends on the type of dismissal and the length of service of the employee in the company, and it is crucial to understand the applicable regulations and seek legal advice in case of doubt or conflict.
The types of dismissal provided for by law in Spain
Wrongful dismissal in Spain occurs when an employer terminates an employee’s contract without just cause or does not follow the correct legal procedure. For example, if an employee is dismissed without receiving the required written notice or for personal reasons of the employer that are not related to the employee’s job performance, such dismissal could be considered unfair.
Objective dismissal is given for economic, technical, organisational or production reasons of the company. A common case is a company that needs to reduce its staff due to a significant decrease in sales, carrying out dismissals based on objective and justified criteria to adjust its labour structure.
Disciplinary dismissal occurs when an employee seriously breaches his or her contractual obligations. For example, this could be the case of an employee who repeatedly arrives late to work without justification, engages in aggressive behaviour towards colleagues or customers, or commits fraud against the company. In these cases, the employer may proceed with disciplinary dismissal, provided that the employee’s misconduct can be proven.
Each of these types of dismissal has different legal implications and requires specific procedures to be followed by the employer in order to avoid possible claims or sanctions.
Compensation for an error in the redundancy settlement
If a company in Spain miscalculates a severance payment, it may face several legal and financial consequences. First, the affected worker has the right to challenge the dismissal before the Social Court. If the compensation paid is found to be less than what was due, the company will be obliged to pay the difference, together with interest.
In some cases, if the miscalculation reflects a violation of labour regulations or a breach of legal procedures, the company may face additional sanctions or fines imposed by the competent labour authority. In addition, the company’s reputation may suffer, especially if the case is perceived as an act of bad faith or negligence towards the employee.
It is crucial that companies take proper advice and carefully review severance pay calculations in order to comply with labour law and avoid potential litigation or additional costs.
In Asesoría Orihuela Costa we are experts in this type of management. If you are looking for a comprehensive agency for companies, our team is prepared to solve all the legal issues that you need to resolve on a daily basis in your company.
