How is severance pay calculated for unfair dismissal in Spain?

For unfair dismissal (despido improcedente), employees are entitled to 33 days of gross daily salary per year of service, capped at 24 months' salary (for contracts signed after 12 February 2012). The daily salary is annual gross ÷ 365. Years of service prior to 12 February 2012 accrue at 45 days/year under the transitional regime.

What types of dismissal exist in Spain?

There are four main types: (1) Unfair dismissal (improcedente): 33 days/year, max 24 months; (2) Objective/economic dismissal (procedente/objetivo): 20 days/year, max 12 months; (3) Disciplinary dismissal (disciplinario, upheld): no severance; (4) Collective redundancy (ERE): 20 days/year, max 12 months — though negotiated collective agreements often exceed the statutory minimum.

How long do I have to challenge my dismissal in Spain?

You have 20 working days from the date of dismissal notification to file a complaint with the labour tribunal (Juzgado de lo Social). This is a limitation period, not a negotiation deadline — once expired, you permanently lose the right to challenge. Prior SMAC (labour mediation) conciliation is mandatory before litigation.

Is the pre-2012 transitional regime always applicable?

The transitional regime applies automatically if your contract predates 12 February 2012 and you are dismissed unfairly. It creates two calculation tranches: (1) From contract start to 11 February 2012: 45 days/year, capped at 42 months' salary; (2) From 12 February 2012 to dismissal date: 33 days/year, capped at 24 months. The overall cap is 720 daily salaries.

Practical tools

Spain Severance Pay Calculator

Calculate the severance pay you are entitled to in Spain based on dismissal type, length of service and salary. Includes the transitional regime for contracts started before 2012.

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Dismissal types and severance pay in Spain

Unfair dismissal (despido improcedente)

The most common scenario. An unfair dismissal occurs when the employer fails to prove sufficient cause, or the alleged cause is not established at tribunal. Severance is 33 days of salary per year of service, capped at 24 monthly payments, for contracts signed on or after 12 February 2012. Earlier contracts are subject to the transitional regime.

Transitional regime (contracts before 12/02/2012)

Employees whose contracts predate the 2012 labour reform are entitled to severance calculated in two tranches: 45 days/year for the period up to 12/02/2012 (capped at 720 days calculated under the old formula) and 33 days/year for the period thereafter, with a combined cap of 42 monthly payments.

Objective / economic dismissal (despido objetivo)

When the employer demonstrates justified economic, technical, organisational or production-related grounds, severance is reduced to 20 days per year, with a maximum of 12 monthly payments. This type requires a 15-day prior notice period.

Collective redundancy / ERE

Collective redundancies based on economic, technical, organisational or production reasons generate severance of 20 days per year, capped at 12 monthly payments. However, agreements reached during the consultation period frequently improve on these minimums. BMC advises both employers and employees in ERE processes.

Key deadlines

You have 20 working days from the date of dismissal to challenge it before the employment tribunal (conciliación previa and demanda). Missing this deadline is fatal — you lose all rights to contest. Seek legal advice immediately upon receiving a dismissal letter.

For a precise assessment of your severance entitlement and challenge options, consult our Employment Law service.

Frequently asked questions

Is severance pay taxable in Spain?

Statutory severance (indemnización por despido) is exempt from Spanish personal income tax (IRPF) up to the legally mandated amount — i.e. 33 days/year capped at 24 monthly payments for unfair dismissal. Any amount exceeding the statutory minimum is taxable.

Can the employer offer a settlement instead?

Yes. The employer may offer a voluntary settlement (finiquito with additional compensation). Any agreed amount above the statutory minimum is generally taxable. A lawyer should review any settlement agreement before signing.

What is the finiquito?

The finiquito is the final settlement payment, separate from severance. It covers outstanding salary, accrued and unused holiday entitlement, and proportional amounts of any bonus payments. Every employee is entitled to a finiquito regardless of the dismissal type.

What happens if the employer declares insolvency?

In insolvency proceedings, unpaid wages (up to 150% of the minimum wage) and severance (up to one year of salary at twice the minimum wage) are covered by FOGASA, the Wage Guarantee Fund.

Does severance apply to fixed-term contracts?

Fixed-term contracts that expire naturally (not early termination) entitle the employee to 12 days of salary per year of service. Early termination by the employer of a fixed-term contract without cause is treated as unfair dismissal.

Related calculators

Finiquito Calculator (ES)Dismissal Compensation Calculator Employee Cost Calculator

Key concepts

Despido Finiquito Ere Cotizacion Seguridad Social

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Dismissed in Spain? Know your rights

Our employment lawyers will assess your dismissal, calculate the correct severance entitlement and represent you if you decide to challenge it.

Speak with a specialist Employment Law service