Severance Pay Calculator in Spain
How to Calculate Severance Pay in Spain?
A dismissal in Spain entails various costs and legal responsibilities.
To ensure compliance with labor regulations and accurately calculate severance pay (or final settlement in the case of contract termination), it is crucial to understand the changes introduced by the Labor Reform of 2012 and all the factors influencing the calculation of severance pay or final settlement.
That’s why we will delve into calculating the cost of firing an employee in Spain, including concepts of final settlement and severance pay, factors to consider, and practical examples.
Severance Pay Calculator in Spain:
Here are some factors you need to understand to calculate the cost of firing an employee in Spain in 2023.
Firstly, are final settlement and severance pay the same?
In short, no.
The final settlement is the document certifying the termination of the employment relationship which establishes the amounts to be paid to the employee. It includes unused vacation days, pending extra payments, accrued wages, and other economic considerations.
On the other hand, severance pay is the financial compensation paid to the employee in case of dismissal and is regulated by law.
What factors should I know to calculate severance pay in Spain?
These factors may vary depending on current labor legislation and specific circumstances of the employee and employer:
- Gross salary: It is a determining factor since severance pay is generally based on a proportion of the employee's monthly or annual gross salary.
- Seniority: In general, the longer the seniority, the higher the severance pay. Labor laws establish a progressive scale that increases the amount of severance pay for each year of service.
- Type of dismissal / resignation: In Spain, there are different types of contract terminations, such as procedente (justified), improcedente (unjustified), and colectivo (collective dismissal). Each type has its own rules and criteria for calculating the corresponding severance pay.
- Professional category: Depending on the employee's professional category or level, multiplicative coefficients may apply in calculating the severance pay. These coefficients are used to adjust the amount of compensation based on the employee's position and responsibilities within the company.
- Collective agreements: Collective agreements may establish specific clauses regarding severance pay, such as minimum amounts or specific calculation formulas. It is important to consider the provisions of the applicable collective agreement for the employee in question.
More about the types of dismissal in Spain:
It is important to note that each case may vary depending on specific circumstances and current labor legislation.
Here are the most common types of dismissal in Spain:
- Procedente (Justified) Dismissal: This occurs when the employer can adequately justify the reasons for dismissal. In this case, no severance pay applies, but the employee is entitled to receive any pending remuneration, such as unpaid salaries or unused vacation days.
- Improcedente (Unjustified) Dismissal: This occurs when the employer cannot adequately justify the reasons for dismissal or has not followed the necessary legal procedures to carry it out.
- Colectivo (Collective) Dismissal: It is a dismissal carried out by a company or entity when multiple employment contracts are terminated simultaneously due to economic, technical, organizational, or production reasons. In collective dismissals, severance pay is applied to the affected employees.
What happens if my employee resigns or their contract expires?
In general, in these cases, the employee would be entitled to a final settlement. Take a look at the most common scenarios:
- Termination of employment by the employee in case of the employer's serious breach: In this case, the employee may request compensation for damages suffered.
- Termination of temporary contract: This occurs when a temporary employment contract comes to an end without renewal. In this case, no specific severance pay applies, but the employee is entitled to receive any pending remuneration for the time worked and other benefits provided by law or the contract.
In conclusion, calculating the cost of firing an employee in Spain and determining the corresponding severance pay or final settlement involves considering various legal and economic factors, as well as the circumstances of each specific case.
At the same time, employees should be aware of their rights and available options in case of dismissal/resignation.
Looking for an employee cost calculator in Spain? Click here.
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