I am finally retiring, what kind of severance pay do I get?

When the time comes to end their working life, workers often have countless doubts about their future. However, the best ally for this can be an employment lawyer who can help them to find out what severance pay they are entitled to.

A pension is an amount paid by a company to an employee after the employee terminates his or her professional relationship before retirement. All employees are entitled to severance pay, including the number of days worked in the previous month and other elements such as pro-rata overtime, holidays, additional pay and bonuses. Severance pay should not be confused with compensation. Severance exists in all cases, but the amount will vary depending on the factors mentioned above. Compensation is not always relevant depending on the reason for termination of employment.

Full retirement settlement: What fees are charged?

Workers shall receive as a pension an amount corresponding to the following items:

• Monthly payment until the termination of the employment relationship.
• Holidays not taken.
• The proportional part of bonuses and extraordinary payments must also be included in the settlement.
• And, if so, the worker who is going to retire will be paid the overtime that the company has not paid him/her.

Are workers entitled to severance pay for termination of employment contracts after retirement?

Current legislation states that employees are not entitled to retirement indemnity if they have all the conditions set out. A different situation is where the applicable collective agreement details the circumstances under which the contract is terminated, i.e. termination of the contract due to retirement, severance pay or a certain amount to be transferred to the stated circumstances.

This is more likely to be the case for early retirement. Unless otherwise specified in the collective agreement, workers who meet the legal conditions for retirement should receive severance pay, but are not entitled to compensation for termination of contract. So, if at retirement the company did not give you a pension or miscalculated it and you want to claim the amount due, we can help you.

How is the pension calculated?

All remuneration acquired but not yet received by the employee at the time of termination of the contract must be included in the settlement calculation. The most common are:

• Wages: Includes wages for days worked in the month of termination. In this case, the gross salary of the previous month is divided by 30 to obtain the daily salary multiplied by the number of days worked in the final month.
• Extra pay: this is the pro-rata share of the extra pay not yet received. Depending on whether it is prorated, if it is half-yearly it applies to the last half year, if it is annual it applies to the last annuity.
• Not taken: Counts the days of paid holidays, but not those not taken. Taking as a reference the first day of the year in which the contract is terminated, 2.5 days are taken per month, and the number of days already taken is deducted. Other payment conditions may also apply, such as agreements, bonuses, overtime pay, targets, etc.
• Percentage of bonuses and overtime: This is the proportional part of the extra pay that is not received. If the worker to be retired does not receive overtime pay, Christmas bonuses, agreed bonuses, etc. It should also be borne in mind that the retirement settlement must deduct all advances made by the company from the payroll and all payments that have not been returned by the worker once the contractual relationship has ended.

When will the pension be paid?

Pensions are normally paid when the professional activity ceases. Depending on the company's procedures, it may take some time, but it will generally be paid on the usual salary terms.

Does early retirement create pension rights?

Yes, entitlement to severance pay arises on termination of employment, although the amount may vary depending on the number of days worked in the month and the proportion of factors such as holidays, salary supplements and overtime. In addition, in the case of early retirement, if the collective agreement so provides, in some cases an incentive compensation may be obtained at the time of retirement.

What happens when it is the employer and not the employee who retires?

• Workers are entitled to monthly compensation regardless of their employment qualification and employment contract.
• Another scenario that may occur is that the employer decides to retire and cease to operate or sell the company, whereby the company is dissolved and liquidated. In this case, the worker is entitled to compensation for a minimum of 20 days per year and payments for a maximum of 12 months.