The rules on severance pay in detail

The amount of statutory pay in cases of dismissal is determined by law. However, industry-wide collective bargaining agreements (and more rarely, company-wide CBAs or employment contracts) normally provide a different method of calculation, which is often more favourable to the employee, especially in certain industries, such as the metal and chemical industries.

Statutory pay is equal to a quarter of a month per year of service up to ten years. From the 11th year, the amount is equal to one third of a month for the years over ten.

Statutory pay is based on the more favourable of either 1) the average salary over the 12 months preceding the termination (or if the length of service is less than 12 months, the average of those months) or 2) the average salary over the three months preceding the termination. In the latter case, yearly and exceptional bonuses are only taken into consideration in proportion to working time (i.e. if a yearly bonus was paid during the last three months, only a quarter of its value will count).

Employees must have at least eight months’ service to receive statutory pay and must not be dismissed for willful or gross misconduct.

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Author: Capstan

Date: December 2019