Understand the judiciary's compensation calculation tool

No one is free from, at any given time, being the victim of dismissal by the company for which he or she is employed. In this type of situation, it is useful to know the amount of compensation to which we are entitled in order to act accordingly. There are many cases in which, in order to obtain the corresponding amount, it is necessary to resort to legal action.

In this sense, the General Council of the Judiciary (CGPJ, from now on) has enabled, within its website, a simple tool that offers the possibility of knowing the amount of compensation to which you are entitled as a result of dismissal. Here we would like to talk to you in depth about it and about this matter in general.

Aspects influencing the calculation of severance pay

The amount of severance pay depends mainly on three factors:

• The length of service of the employee in the company: this is the number of months during which the employee has been employed in the company that has dismissed him/her.
• The salary received: this is calculated on the basis of the total gross annual amount received by the employee.
• The type of dismissal: the only dismissals that entail the payment of compensation are objective dismissals and unfair dismissals. For obvious reasons, fair dismissals are not subject to severance pay, although they are subject to the payment of a severance payment.

The amount of compensation depending on the type of dismissal

Earlier we mentioned that, depending on the time worked and the type of dismissal suffered by the worker, the amount of compensation varies. Here we are going to see how:

• Dismissal for objective reasons: this type of dismissal entails the payment of compensation equivalent to 20 days' salary for each year of work performed in the company. The maximum limit is set at 12 monthly payments, i.e. one year's salary. In other words, the compensation may never exceed the equivalent of the net monthly salary multiplied by 12.
• Unfair dismissal: in order to carry out this type of dismissal on a contract signed after 12 February 2012, the company must pay the worker compensation equivalent to 33 days per year worked with a maximum limit of 24 monthly payments or, in other words, two years' salary.

The calculation of mixed severance payments

But what happens if the contract that is terminated unfairly was signed before 12 February 2012, i.e. before the entry into force of the latest Labour Reform? Well, it will be necessary to proceed to the calculation of a mixed severance payment, as the previous legislation provided for other amounts:

• Period worked prior to 12 February 2012: the worker is entitled to receive compensation equivalent to 45 days' salary for each year worked with a maximum of 42 monthly payments, i.e. 3.5 years.
• Period worked after 12 February 2012: here the above mentioned and the stipulations of the aforementioned Labour Reform come into force, i.e. 33 days' salary per year worked with a maximum of 24 monthly payments.

As can be seen, despite the change of regulations made in 2012, there is no retroactivity with the purpose of benefiting the interests of the long-term worker.

How to know the value of a day's salary?

This process for calculating severance pay is simple but, at the same time, a little tedious. The first thing to do is to collect all the pay slips corresponding to the last year worked, including those referring to the extra payments if these have been paid separately and not pro rata. If this is the case, the gross amount of these must be added to the total and then divided by 12.

Once the gross monthly salary including extra payments has been obtained, divide this amount by 30. The result will be the gross salary received for each day worked. Afterwards, you only have to multiply this amount by 20, 33 or 45, depending on whether it is a dismissal for objective causes, unfair dismissal after 12 February 2012 or unfair dismissal before that date.

Let's take the example of a worker who has been paid €24,000 gross per year for the last 5 years and has been unfairly dismissed:

• Annual salary including bonuses: 24 000 €.
• Average monthly salary: 24 000 € / 12 months = 2000 € per month
• Average daily salary: 2000 € / 30 = 66,66 € per day
• Compensation per year worked: 66,66 € x 33 = 2200 € per year
• Total compensation: 2200 € x 5 years worked: 11 000 €.

It should be borne in mind that this €11,000 is gross, i.e. the employee must deduct the corresponding personal income tax to obtain the net amount that he/she will receive.

It should also be taken into account that months worked part-time are counted as whole months, even if only one day has been worked. For example, if the contract we have used as an example was signed on 25 March 2012 and was terminated on 2 March 2017, that first and last month will be considered as if they had been worked in full when calculating the compensation.

A simpler way of calculating the amount of compensation

The CGPJ, aware of the number of claims that arise and of the difficulty that the average worker has in calculating the amount of compensation due, has set up a simple tool on its website that allows them to obtain the exact amount in a matter of seconds.

To use it, all you have to do is enter the date on which your employment relationship with the company began and then add the end date, i.e. the date on which the objective or unfair dismissal took place. Subsequently, you have to add the amount of the gross daily, monthly or annual salary. However, this must include the amount of the non-prorated extra payments, so the annual option is the most convenient. Finally, just click on 'Consult' and the website will automatically show you the exact amount of compensation you are entitled to.

It should not be forgotten that severance pay has nothing to do with the settlement. The latter refers to the number of days worked during the month in which the employment relationship ends, as well as the corresponding days of holidays not taken. The employer must pay the amount to the employee at the time of termination of the contract.

In short, this is all you need to know about calculating severance pay. As you may have noticed, technology is making it easier and easier for us to know exactly what legal and employment issues, which, until not so long ago, could have been quite complex.