Spanish Severance Pay: How Indemnizacion por Despido Is Calculated (2026)

When an employment contract in Spain ends through dismissal, the worker is usually entitled to statutory severance pay (indemnizacion por despido). The amount depends on how the dismissal is classified, how long the worker has been employed, and their monthly salary. This guide covers the two main statutory formulas, how the daily salary and the salary cap are applied, and what the pre-2012 transition rule means for long-serving employees.

The two main types of dismissal and their rates

An unfair dismissal (improcedente) is one where the employer has no valid legal cause or has not followed the required procedure. The worker receives 33 days of daily salary for each completed year of service, up to a maximum of 24 monthly salaries. An objective dismissal (objetivo or procedente) relies on specific legal grounds such as economic, technical, organizational, or production reasons. The rate is 20 days per year, capped at 12 monthly salaries.

How daily salary and the cap are calculated

The daily salary (salario diario) is the annual salary divided by 365 days. Because the monthly salary is a useful starting point, the formula is: salario diario = salario mensual x 12 / 365. The gross severance (indemnizacion bruta) is then: salario diario x dias por año x años de servicio. The cap is: salario mensual x tope en meses. The final indemnizacion is the lower of the gross amount and the cap.

Worked example: 2,000 EUR per month, 10 years, unfair dismissal

Take a worker earning 2,000 EUR gross per month who is dismissed unfairly after exactly 10 years. The daily salary is 2,000 x 12 / 365 = 65.75 EUR. Multiplying by 33 days and 10 years gives an indemnizacion bruta of 65.75 x 33 x 10 = 21,699 EUR. The cap is 2,000 x 24 = 48,000 EUR. Because 21,699 is well below the cap, the statutory indemnizacion is approximately 21,699 EUR. The cap would only bite if the same worker had served around 60 or more years.

The pre-2012 transition rule: 45 days per year

Spain's labor reform of February 2012 reduced the unfair dismissal rate from 45 days to 33 days per year for new contracts. For workers who started before 12 February 2012, the service accumulated up to that date is calculated at the old 45 days per year rate (with a partial cap of 42 months of salary for that segment), and service after the reform date is calculated at 33 days. The two segments are then added together. This calculator uses the post-2012 statutory rate of 33 days for the full period, which is the correct formula for contracts starting on or after 12 February 2012.

Indemnizacion vs. finiquito: two different payments

The indemnizacion por despido is the statutory compensation for losing the job. The finiquito is a separate settlement document that covers outstanding pay: the proportional part of the annual bonus (paga extra), any accrued but untaken holiday pay, wages for days already worked in the current pay period, and any other agreed payments. These two amounts are often paid at the same time but they are distinct. The indemnizacion compensates for the dismissal; the finiquito settles what the employer already owed.

Frequently asked questions

• Is severance pay taxable in Spain? Statutory indemnizacion por despido is generally exempt from personal income tax (IRPF) up to the legally required amount. Any amount above the statutory minimum or agreed voluntarily may be subject to tax. Consult a tax professional for your specific situation.
• What if the dismissal is declared void (nulidad)? A null dismissal means the worker is reinstated with back pay, rather than receiving an indemnizacion. Nullity applies in cases of discrimination or violation of fundamental rights.
• Does part-time work affect the calculation? Yes. The monthly salary used must reflect the actual agreed salary, including any applicable pro-rata amounts. Part-time workers calculate the daily salary using their actual contracted pay.
• What does years of service mean exactly? The anos de servicio are the full years and proportional months of continuous service under the employment contract with that employer. Fractional years are counted proportionally.