The three types of dismissal
The Workers' Statute distinguishes three scenarios. Disciplinary dismissal is based on a serious breach by the worker: absenteeism, indiscipline, agreed drop in performance. Objective dismissal responds to causes unrelated to their conduct: ineptitude, lack of adaptation to technical changes, or economic, technical, organisational or production reasons. Collective dismissal, the ERE, is objective dismissal applied to a significant number of staff.
Everything depends on the classification. If the dismissal is fair, there is no severance. If it is unfair, the law sets the maximum. And if it is null, due to discrimination, violation of fundamental rights or during pregnancy or birth leave, the consequence is mandatory reinstatement with back pay.
How much must be paid
For contracts signed after 12 February 2012, unfair dismissal is compensated with 33 days' salary per year worked, capped at 24 monthly payments. Earlier contracts retain 45 days per year.
Objective and collective dismissal pay 20 days per year, capped at 12 monthly payments. In both cases, the final settlement is added: outstanding salaries, proportional share of extra payments and untaken holidays. The final settlement is always paid, even in fair dismissal or voluntary resignation.
The procedure: letter, notice and payment
Dismissal must be communicated in writing with the specific facts that motivate it. In objective dismissals, 15 days' notice must also be given and the severance must be made available to the worker at the same time as the letter is delivered.
If the worker challenges it, conciliation before the SMAC is first attempted; if there is no agreement, the claim goes to the Social Court within 20 working days from the communication. A procedural error, a letter without facts or severance not made available turns a dismissal that could have been fair into an unfair one, and the difference is counted in months of salary.
Taxation and real cost
Legal severance for dismissal (unfair or objective) is exempt from personal income tax up to 180,000 euros; anything above that is taxed as employment income. Severance agreed by mutual consent does not enjoy that exemption, except in the specific cases recognised by the law.
The cost of a poorly managed dismissal is not only the severance: back pay if declared null, costs if there is a claim, and management time. With well-documented contracts and dismissals, with the facts written and delivered on time, that risk is greatly reduced.
