Severance pay and final settlement in Spain: the difference

Severance compensation and the final settlement are different. Compensation (indemnización) depends on why and how employment ends. The finiquito settles outstanding employment amounts. Receiving one does not establish that the other has been correctly calculated.

What may be included in the finiquito?

Depending on the facts, it can include outstanding salary up to termination, accrued extra salary payments not already paid or prorated, accrued unused holiday, commissions, bonuses and other amounts that have fallen due. Each item needs a separate period, calculation and payment check. Some variables may require review of the scheme’s accrual conditions, rather than an automatic assumption that everything is lost on leaving.

Extra payments already spread across monthly payslips must not be counted twice. Genuine expense reimbursements should be identified separately from salary. Any deductions, such as an alleged advance or a disputed notice deduction, need a legal or contractual basis and an accurate calculation.

When dismissal compensation is due

Objective dismissal: the ordinary statutory amount is twenty days’ salary per year, with monthly proration and a twelve-month cap.
Justified disciplinary dismissal: no statutory dismissal compensation, although outstanding settlement amounts may remain due.
Unfair dismissal with compensation rather than reinstatement: normally thirty-three days per year, with monthly proration and a twenty-four-month cap, subject to transitional rules.
Void dismissal: normally reinstatement and back pay; it is not automatically converted into thirty-three days’ compensation.

The option between reinstatement and compensation normally belongs to the employer in an unfair-dismissal case, with special rules for employee representatives and union delegates. If objective compensation was already paid and the dismissal is later found unfair, the amounts must be reconciled; two full compensations are not paid for the same dismissal.

Contracts starting before 12 February 2012

The unfair-dismissal calculation has an earlier period at forty-five days per year and a later period at thirty-three. The combined ceiling is normally 720 days of salary. If the earlier period alone already exceeds that figure, that earlier amount establishes the limit, subject to a maximum of forty-two months. It is incorrect to apply forty-five days to every year of an older contract.

Salary supplements, bonuses and service

The relevant salary can include basic pay, salary supplements, extra payments, commissions, bonuses, variable earnings and benefits in kind. Their accrual, appropriate reference period and the applicable collective agreement must be reviewed. A line appearing on a payslip is not necessarily salary, while an earned salary component should not be omitted merely because it varies.

Do not use net take-home pay as the compensation basis or reduce the analysis to basic salary plus fixed supplements. Service can involve earlier successive contracts or transfers between employers; the date on the latest contract may not resolve the issue. Separate the daily salary, recognised service, compensation days and statutory ceiling.

Before signing or accepting payment

Ask for an itemised calculation and a copy of every document. Distinguish acknowledgement of delivery, acknowledgement of actual payment and agreement to settle a dispute. Adding “no conforme” does not make every waiver harmless. Do not sign that money has been received if it has not, and check the proposed agreement before accepting its terms.

A discrepancy may require a dismissal challenge, a money claim or both, depending on what is contested. Do not assume that a one-year wage-claim period applies to challenging the dismissal itself. Dismissal challenges normally have a twenty-working-day deadline; ordinary salary claims have different limitation rules.

Documents for a calculation review

Bring contracts and amendments, service records, payslips, extra-payment and bonus schemes, benefit-in-kind information, holiday records, the collective agreement, dismissal letter and bank payments. Any numerical illustration must be checked against those components; a calculator cannot establish entitlement on its own.

Legal sources

Workers’ Statute, Articles 26, 49, 53, 56 and transitional provision 11 (Spanish legislation).

Discuss your case with Manrique de Torres Abogados

We can review your documents and explain the available options. Contact us or Book a video consultation. You can also call +34 685 807 112 or email info@manriquedetorres.com.

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