Termination with severance pay: How to terminate your employment contract and receive severance pay

Termination with severance pay: How to terminate your employment contract and receive severance pay
Published on: 10 May 2024

Table of contents

Termination with severance pay by the employee allows you to terminate the employment contract voluntarily and receive compensation.

Let's look at a quick example, imagine that you have a work shift that allows you to perfectly reconcile your work and family life. You can take care of your children's needs without having to miss work.

Suddenly the company unilaterally decides to change your working hours from one day to the next.

This change could be considered a serious change in your working conditions, which would mean that even if you terminate your employment contract, the company would have to compensate you.

But this has to be proven, of course. It is often not that simple.

That is why there are employment lawyers like the ones at Elias y Muñoz Abogados, to help you prove it.

But let's take a closer look at what this "termination with severance pay by the worker" is all about.


What is termination with severance pay?

Termination with severance pay is a legal way in which you, as an employee, can terminate your employment contract in response to certain situations due to breach of contract by the employer, and also receive financial compensation even if you leave your job voluntarily.

This mechanism, regulated by article 50 of the Workers' Statute, establishes the justified causes that will allow you to request the termination of your contract and receive compensation equivalent to that provided by law for unfair dismissal.

Differences between termination with severance pay and voluntary termination of the employment contract

There are substantial differences between the two concepts, but it boils down to the following:

In termination with severance pay, the employee is entitled to financial compensation due to serious breaches by the company.

These breaches can be substantial modification of working conditions, non-payment of wages, or serious breaches by the employer.

In voluntary termination, it is the employee who decides to terminate the employment relationship for personal or professional reasons, and therefore, it is not necessary to justify the cause and it will not entail any financial compensation in favour of the employee.

Situations that entitle the worker to a termination with compensation

The situations that may give rise to a substantial modification of working conditions are those listed in Article 41 of the Workers' Statute.

The following, among others, are considered substantial changes in working conditions:

a) Changes in the length of the working day.

b) Changes in the timetable and organisation of working time.

c) Changes in the shift work system.

d) Changes in the system of remuneration and pay.

e) Changes in the way of working and the system of assessing the performance of the worker.

f) Changes or new assignment of functions, especially if they exceed the limits established for functional mobility, i.e. the performance of functions that do not fall within the worker's competence according to his or her employment contract or professional group.

For example, the company you work for unilaterally decides to lower your commissions, and also to lower the fixed salary you receive every month.

The reduction means a substantial reduction in your income, so you decide to negotiate with the company.

The company does not give in and tells you that these are the new working conditions.

In this case, you would have the right to sue the company for a substantial change in your working conditions.

Therefore, you could request a compensated termination of your employment contract.

What is considered to be substantial modification of working conditions as grounds for termination with compensation?

The modifications we have seen in the previous point can affect various aspects relevant to the worker, so let us go into a little more detail:

  • Changes in working hours that entail a significant alteration in the reconciliation of the worker's work and personal life can be considered as a substantial modification of working conditions.
  • Changes in salary that entail a significant decrease in the initially agreed remuneration may also constitute just cause for requesting the termination of the contract with compensation.
  • Changes in working shifts that substantially affect the organisation of the worker's life can be considered as a modification that justifies the compensated termination of the employment contract.

As you can see, it is notorious that you may be entitled to claim the termination of the contract and to receive compensation equivalent to that established by law for unfair dismissal.

When this type of change occurs, it is clear that either the company wants you to leave for free, or in many cases, they have decided to restructure in an attempt to save the corresponding severance pay.

Non-payment or delays in the payment of wages as grounds for termination with severance pay

Non-payment or continuous delays in the payment of wages by the employer are serious situations that should lead you to request the indemnified termination of your employment contract.

  • The company's failure to pay your salary on time directly affects your financial stability, generating situations of stress and uncertainty. Faced with this problem, you can choose to request the termination of your contract and claim the corresponding compensation.
  • Continuous delays in the payment of wages are also considered serious misconduct on the part of the employer, as they affect your ability to cover your financial needs and obligations. In such cases, you may decide to terminate your employment and receive compensation for unfair dismissal.

It is essential that, as an employee, you are aware of your rights in relation to the payment of your salary and, if you are faced with breaches by the company, seek legal advice to ensure a viable and compensated exit from your company.

Other serious breaches by the employer as grounds for termination with severance pay

In the employment sphere, there are additional situations in which you as an employee may be able to request a termination of your contract with compensation.

These breaches may involve a number of actions that directly affect you as an employee and your employment relationship:

  • Unjustified refusal to reinstate you to your original working conditions when you are entitled to do so.
  • Discriminatory dismissals or dismissals based on grounds prohibited by law.
  • Harassment at work or violation of your fundamental rights as an employee. Although here we could be talking about committing a crime in addition to violating your rights.
  • Serious misconduct in failing to provide adequate health and safety conditions in the workplace.

In these circumstances, as an employee you also have the right to request the termination of your employment contract and receive financial compensation for unfair dismissal.

How is the compensation corresponding to the worker for termination with severance pay calculated?

In the event of a breach by the employer that results in a termination with compensation for the employee, you will be entitled, as we have already mentioned, to receive financial compensation that corresponds to the amount established by law for cases of unfair dismissal.

This compensation is calculated taking into account various factors, such as the worker's length of service in the company, their basic salary and any additional compensation that may correspond to them.

Current legislation establishes that the formula for calculating this compensation is as follows:

  • 45 days' salary for each year worked until 12 February 2012, with a maximum of 42 monthly payments.
  • After that date, 33 days' salary for each year worked, with a limit of 24 monthly payments.

Lawyers with expertise in cases of termination for severance pay

It is essential to have specialised legal advice in cases of termination of employment with severance pay.

One of our employment lawyers will provide guidance and legal representation in the legal proceedings, which you will almost certainly have to go through to ensure that your rights as an employee are well protected.

They will help you to understand in detail your options and rights in this type of situation, as well as to determine the viability of your claim before a labour court (which has jurisdiction over employment matters).

Thanks to being well advised, you will make better decisions, increasing your chances of success and minimising the risks.

All of this with a view to obtaining the compensation you are entitled to for the serious breaches by your employer that force you to stop working for this company.

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