What Severance Pay Rules Must Employers Follow in Spain?

Which Employees Qualify for Severance Pay?

Employees in Spain qualify for severance pay if they meet one of the following conditions:

• They are dismissed for objective reasons such as economic, organizational, or production-related factors.
• They are unfairly dismissed when termination lacks proper justification or due process.
• Their fixed-term contract ends without renewal, depending on the terms and contract length.
• Their employment ends due to collective redundancy (ERE).
• They are terminated without sufficient written notice or legal cause.

Employees do not qualify for severance if dismissed for proven disciplinary reasons or if they voluntarily resign.

What Are the Legal Timelines for Paying Severance?

Severance pay in Spain must be settled at the time of termination. When an employee is notified of dismissal, the employer is generally required to provide the severance payment along with the termination letter.

If the employer cannot pay immediately due to financial hardship, they must request an extension that is explicitly justified and documented. In cases of collective redundancy or mass layoffs, payments must follow the agreed-upon schedule in the redundancy plan. Failure to pay promptly can result in fines and interest penalties.

What Penalties Apply if Severance Is Not Paid Correctly?

Failing to comply with Spain’s severance pay laws can lead to serious legal and financial repercussions. Employers who do not pay the correct amount or miss payment deadlines may face:

• Employee claims before the Spanish Labor Court (Juzgado de lo Social).
• Interest charges on unpaid severance.
• Government fines for labor law non-compliance.
• Reinstatement orders in cases of unfair dismissal rulings.
• Reputational damage and additional legal costs from disputes.

Accurate calculation and timely payment are essential to avoid litigation and penalties.

Does Outsourcing Employment via an EOR Change Severance Liability?

Yes. When you hire through an Employer of Record (EOR) in Spain, the EOR becomes the legal employer of record and assumes all statutory responsibilities, including severance obligations. This means the EOR handles the termination process, calculates severance based on Spanish labor law, and ensures timely payment.

For client companies, this reduces compliance risk. The EOR ensures full adherence to the Workers’ Statute and collective agreements, protecting you from errors or disputes that could arise from miscalculating severance.

Be 100% Compliant in Offering Severance with Playroll

Navigating Spain’s labor regulations is complex, especially when it comes to severance calculations and dismissal procedures. That’s where Playroll steps in. Our platform ensures every termination is managed in line with Spanish law, calculating the correct severance down to the last euro and ensuring payments are made on time and in full compliance.

With Playroll, global employers do not have to worry about missteps or missed deadlines. We handle every aspect of employment compliance, from contract management to severance settlements, so you can focus on your people and your growth. Partner with Playroll to make your workforce transitions smooth, compliant, and risk-free, wherever you operate.