Dismissal in Spain: finiquito vs severance and how to calculate each

Almost every page on the finiquito after a dismissal mixes up two different things. The finiquito (final settlement) is what you have already earned and not been paid. Severance is compensation for losing your job, and it exists only in some dismissals. They are added together on the paper you are handed, but they are worked out with different rules, and confusing them is the easiest way to end up short of money or to sign a figure you do not understand.

The difference in one table

One worker, three dismissals

Nuria earns €30,000 gross a year in 14 payments. She started on 4 November 2019 and the dismissal takes effect on 15 October 2026. She has 30 calendar days of holiday a year, has taken 20, and her extra payments are earned by half-years. Her finiquito works out like this:

• Current month: 15 days × €71.43 (2,142.86 / 30) = €1,071.43.
• Christmas payment: from 1 July to 15 October is 107 days of 184. 2,142.86 × 107 / 184 = €1,246.12.
• Holiday: from 1 January to 15 October is 288 days of 365, so 23.6712 days earned. Less the 20 taken, 3.6712 days remain × €71.43 = €262.23.

The finiquito is €2,579.78 gross, whatever the type of dismissal. How each item is worked out step by step is in how to calculate your finiquito.

Nuria’s service is 6 years, 11 months and 12 days. With the month rounding that our calculator uses, that is 7 years. Her daily salary for severance is €82.19 (30,000 / 365).

Each severance amount is added to the finiquito of €2,579.78, which is the same in all three cases:

Unfair dismissal: 33 days per year

When the dismissal is declared unfair (despido improcedente) and the company chooses to pay severance, article 56.1 of the Statute sets 33 days of salary per year of service, with a maximum of 24 months’ pay. In Nuria’s case: 7 × 33 = 231 days × €82.19 = €18,986.30.

If the contract predates February 2012, the sum changes, and so does the cap. It is covered, with three examples, in how to calculate unfair dismissal severance.

Objective dismissal: 20 days per year

In a dismissal on objective grounds (despido objetivo), article 53.1 requires the company to make available to you, together with the letter, severance of 20 days per year of service up to a maximum of 12 months’ pay, and to give 15 days’ notice. In the example: 7 × 20 = 140 days × €82.19 = €11,506.85.

If you are not given the notice, article 53.4 keeps the obligation to pay the wages for that period. In Nuria’s case, that would be 15 days × €71.43 = €1,071.43 more in the finiquito. During the notice period you also have a paid leave of six hours a week, with no loss of pay, to look for a job. The detail is in severance for objective dismissal.

Disciplinary dismissal upheld: finiquito but no severance

If the company proves the misconduct in the letter and the dismissal is declared justified, article 55.7 says there is no right to severance or to salarios de tramitación (back pay). Nuria would keep the €2,579.78 of the finiquito.

Keep the notification and compare its contents with the requirements for a dismissal letter in Spain.

That does not take away her unemployment benefit: a dismissal, of any type, is a legal situation of unemployment. It is explained in disciplinary dismissal and unemployment benefit.

What about income tax?

The finiquito is wages and salary, and the company applies withholding and contributions as on a payslip. Severance is different: article 7.e of the income tax law exempts it in the compulsory amount the Statute sets, up to a limit of €180,000. An amount set by collective agreement, private deal or contract is not treated as compulsory, except what is agreed at the conciliation hearing before the administrative service.

That is why it helps for the receipt to show the two separately: if everything comes as a single figure, you will not know what the withholding was applied to.

Holiday and unemployment benefit

Unused holiday goes into the finiquito, but it has an effect on your paro. Under article 268.3 of the General Social Security Act, if you have not taken it before the contract ends, the legal situation of unemployment and the start of the right to benefit happen when that period ends. You have fifteen working days from then to apply.

How long you will receive benefit depends on what you have paid in, and it is in the table of contribution days and unemployment benefit.

What to check before signing the receipt

1. That the items are separate. Current month, extra payments, holiday and severance, each with its own amount.
2. That the holiday days match your own count. Those earned up to the effective date, minus those you have taken.
3. That the length of service is the one in your contract. A wrong start date changes the severance, not the finiquito.
4. That there are no clauses waiving the right to claim. If you do not understand one, do not sign until someone else has read it with you.

If something does not add up, sign as “not in agreement”. And remember that the deadline to challenge the dismissal is 20 working days, even if you have been paid.

If the company does not pay your finiquito

Challenging the dismissal within 20 working days is one thing, and the time limit for claiming the sums you are owed is another. For the second, article 59.1 of the Statute says that actions arising from the contract with no special time limit lapse one year after it ends. That is more room, but it is best to claim as early as possible and in writing: a burofax (certified delivery) or an email with a read receipt leaves proof of the date on which you asked to be paid.

As regards salary, article 29.3 sets interest for late payment at ten percent of the amount owed. If the unpaid amount is significant, a union or an employment lawyer can tell you whether that interest applies in your case and how to bring the claim.

If your contract has also been terminated and you want to challenge that decision, check the deadline to challenge dismissal in Spain separately from other claims.