How much am I entitled to for an unfair dismissal?

As a general rule, 33 days' salary per year worked, up to a maximum of 24 months' pay. If your contract predates 12 February 2012, the earlier period is calculated at 45 days per year. The employer may choose between reinstating you and paying the severance.

Which salary is used to calculate severance?

The total gross salary you were earning at the time of dismissal, including extra payments, fixed supplements and benefits in kind. Non-salary items that reimburse expenses, such as subsistence or travel allowances, are not included. An incorrectly calculated reference salary is one of the most common reasons for claims.

If I accept a termination by mutual agreement, do I get severance and unemployment benefit?

Mutual agreement does not generate statutory severance: you only receive what is agreed. Moreover, as a general rule it does not give access to unemployment benefit, because the law treats it like a voluntary termination. Before signing, it is wise to weigh up the consequences with an adviser.

Is severance pay taxed?

The mandatory amount under the Statute is exempt from income tax, up to a ceiling of 180,000 euros. Anything received above that minimum is taxed as employment income, although a reduction may apply if service exceeds two years. For unfair dismissal, the exemption requires a conciliation agreement or a court ruling.

Does service under earlier fixed-term contracts count?

If contracts were chained without significant breaks and there is an essential continuity in the relationship, courts usually count all service from the first contract. Each case depends on the length of the breaks and the circumstances. That is why it is important to keep all contracts and your Social Security employment record.

What should I do if I disagree with the severance offered?

You can sign the letter and the settlement as not in agreement and file for conciliation within 20 working days of the dismissal. Agreements are often reached at the conciliation hearing. If not, the next step is a claim before the employment court.

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Severance pay is the compensation an employee receives when the employer terminates the contract in certain circumstances. The amount depends on three factors: the type of dismissal, length of service and salary. Understanding how they combine lets you judge whether an offer is reasonable and how much room there is to negotiate or bring a claim.

Types of dismissal and days of severance

The Workers' Statute assigns each type of termination a number of days' salary per year of service and, where applicable, a maximum cap. These are the most common cases:

Unfair dismissal: 33 days per year, up to a maximum of 24 months' pay (720 days' salary).
Objective dismissal on economic, technical, organisational or production grounds, and collective redundancy (ERE): 20 days per year, up to a maximum of 12 months' pay.
End of a fixed-term contract: 12 days per year worked.
Disciplinary dismissal upheld as fair: no severance.
Mutual agreement or resignation: no statutory severance; any agreed amount depends on negotiation.

How it is calculated

The general formula is: severance = daily salary x days per year x years of service, subject to the applicable cap. The daily salary is usually obtained by dividing gross annual salary by 365, and it must include every salary item: base pay, fixed supplements, the pro rata portion of extra payments and benefits in kind.

Length of service runs from the start of the employment relationship, including earlier contracts chained together without significant breaks. Periods of less than a year are prorated by months, so 5 years and 6 months count as 5.5 years. The calculator asks for the start date and the dismissal date, works out the months of service counting any part of a month as a full month, which is the usual approach of the courts, and shows the resulting service in years and months.

Worked example

An employee on a gross salary of 30,000 euros a year, who started on 1 April 2021 and is dismissed on 31 March 2026 (exactly 5 years), has a daily salary of 30,000 / 365 = 82.19 euros. If the dismissal is ruled unfair, they are entitled to 33 x 5 = 165 days, around 13,562 euros. If it were a fair objective dismissal, it would be 20 x 5 = 100 days, around 8,219 euros. If the dismissal took effect on 15 April 2026, the 15 days of the 61st month would count as a full month and unfair dismissal severance would rise to 33 x 61 / 12 = 167.75 days.

The caps start to matter with long service. For unfair dismissal, the 720-day limit is reached after about 21.8 years; for objective dismissal, the 12-month cap is reached at 18 years. On the same 30,000-euro salary, the maximum for an unfair dismissal would be around 59,178 euros.

Contracts that began before the 2012 reform

The labour reform that came into force on 12 February 2012 reduced severance for unfair dismissal from 45 to 33 days per year. For contracts that began before that date, a two-tier calculation applies: 45 days per year up to 12 February 2012 and 33 days per year from then on.

The cap for these contracts is 720 days, unless the first tier alone already exceeds that figure; in that case the first-tier amount applies, with nothing added and up to a maximum of 42 months' pay. For example, someone hired on 1 January 2005 and dismissed on 31 March 2026 would accumulate 86 months in the first tier, 322.5 days, and 170 months in the second, 467.5 days; as the total of 790 days exceeds 720, the 720-day cap applies, which on a 30,000-euro salary is around 59,178 euros. The calculator detects this case from the start date: if it is before 12 February 2012 and the dismissal is unfair, it shows the breakdown of both tiers and the cap that applies.

Deadlines, tax and points to watch

The employee has 20 working days from the dismissal to file for conciliation and, if necessary, bring a claim. It is a strict time limit, so missing it means losing the chance to have the dismissal declared unfair. In objective dismissals, the employer must make the severance available when handing over the letter and give 15 days' notice or pay in lieu.

Severance is exempt from income tax up to the mandatory amount under the Statute, with a ceiling of 180,000 euros. For the exemption to cover unfair dismissal severance, the unfairness must be acknowledged at the conciliation hearing or by a court ruling. Amounts agreed above the legal minimum are taxable.

It is also worth knowing that there is an ongoing legal debate over whether the statutory caps guarantee adequate compensation in every case, and some courts have awarded additional amounts in exceptional situations. The general rule, however, remains as described.

Content written and reviewed by the advisory team at Vertice Gestión Empresarial. Results are for guidance only and do not replace professional advice.

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