What Severance Pay Rules Must Employers Follow in Andorra?

Which Employees Qualify for Severance Pay?

• Employees hired under an indefinite contract who are dismissed without just cause generally qualify for statutory severance.
• Employees terminated for economic, organizational, or technological reasons may qualify if the dismissal is not attributable to serious misconduct.
• Employees with at least the minimum continuous service required by the Labour Relations Code at the time of dismissal are more likely to qualify.
• Employees whose fixed-term contracts are ended early by the employer without a valid reason may be entitled to compensation.
• Employees who successfully challenge an unfair or wrongful dismissal in court can receive higher severance or compensation awards.
• Senior managers may have specific severance or notice terms if these are written into their individual employment contracts or collective agreements.

What Are the Legal Timelines for Paying Severance?

In Andorra, severance is normally due at the effective date of termination, together with the employee’s final salary and accrued but unused holiday pay. Your company should calculate the amount in advance and pay it no later than the last working day or the date the dismissal takes effect. If the dismissal is disputed, courts may later adjust the amount, but you should still pay what you reasonably believe is owed on time. Any additional sums ordered by a court must be paid within the deadlines set in the judgment to avoid enforcement measures. Keeping clear written records of calculations and payment dates is essential for demonstrating compliance.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Andorra, you risk financial, administrative, and reputational consequences. Labour authorities and courts can intervene where employees challenge dismissals or unpaid entitlements, and non-compliance can quickly become more expensive than paying correctly from the start.

• Courts can order payment of outstanding severance plus interest and legal costs.
• Unfair or wrongful dismissal findings can lead to higher compensation than the original statutory amount.
• Persistent non-compliance can trigger inspections and closer scrutiny from labour authorities.
• Disputes over severance can damage your employer brand and make future hiring harder.
• Contractual breaches may expose your company to additional damages claims from senior staff.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as https://www.playroll.com/employer-of-record does not remove the need to follow Andorran severance rules, but it can shift day-to-day compliance tasks. In a typical EOR model, the EOR is the legal employer in Andorra and is responsible for drafting contracts, applying notice rules, and calculating statutory severance. However, your company usually decides when and why to terminate, so you remain commercially and contractually responsible for funding any severance owed. If the EOR misapplies local law, authorities may still look to the legal employer first, then recover costs from you under your service agreement. Clear allocation of responsibilities and prompt funding of termination costs are key to avoiding disputes.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate Andorran severance rules by embedding local legal requirements into every employment contract and termination workflow. Our team tracks updates to the Labour Relations Code, typical court practice, and market norms so your severance calculations reflect both statutory minimums and realistic risk. You get clear, upfront estimates of potential costs before you confirm a dismissal.

When you hire in Andorra through Playroll’s EOR solution, we act as the local employer of record and manage notices, documentation, and final-pay calculations end to end. We coordinate timing so severance, unused holiday, and final salary are paid together, on time, and with the correct payslip breakdown. That way, your managers can focus on business decisions while we handle the compliance details that keep your company out of disputes and penalties.