How to calculate the severance pay you are entitled to if you are dismissed

Ending an employment relationship is never easy, and beyond the emotional impact, important questions arise: how much money am I entitled to receive? Am I being paid fairly? Understanding how the final settlement is calculated is essential to avoid mistakes and make sure your employment rights are respected.

It is important to distinguish the final settlement from severance compensation, although they are often confused. While compensation is linked to the dismissal itself and to your length of service at the company, the final settlement groups together all the outstanding amounts the company must pay you when closing your contract: unpaid wages, accrued holidays, prorated extra payments and other outstanding items.

Although at first glance it may seem complicated, calculating the final settlement follows a clear and systematic logic. Knowing it will allow you to review the figures, understand each item and make sure you receive exactly what you are entitled to. In this article, we will guide you step by step so you can calculate your final settlement without surprises.

When are you entitled to a final settlement upon dismissal?

The final settlement must always be paid whenever an employment relationship ends, regardless of the reason: dismissal, end of contract, voluntary resignation or even during the onboarding process at the company if it is interrupted prematurely.

In other words, whenever you stop working for a company, they must settle all outstanding amounts with you. These amounts may include several items:

• Outstanding salary: the days worked that you have not yet been paid for.
• Untaken holidays: the days of rest accrued that you were unable to take.
• Extra payments: if your salary does not include them prorated, you are entitled to receive the proportional part.
• Outstanding overtime: any additional time worked that has not been paid

Understanding these concepts well is important, both for employees and for companies that need to organise your employees' holidays properly. And remember: just as you carefully choose a quality desk chair to take care of your day to day, it is also important to take care of these details when an employment relationship ends.

How a worker's final settlement is calculated

Calculating the final settlement may seem complicated, but in reality it follows a fairly clear structure. Knowing each item will allow you to make sure the company pays you everything you are entitled to when your employment relationship ends. Let's break it down step by step so you can understand it easily.

1. Outstanding salary for the days worked

The first step is to calculate the days you have worked in the last month and have not yet been paid for.

For example, if you are dismissed on the 15th, you will have to be paid for those 15 days of salary.

Basic formula:

Monthly salary / 30 days × days worked

This calculation can be adjusted if your contract indicates that the month is counted in a different way, but in general this is the most commonly used method.

2. Untaken holidays

Holidays are accrued proportionally throughout the year. If you have not taken them, they must be paid to you in the final settlement.

Normally around 30 days of holiday are accrued per year, that is, about 2.5 days per month worked.

This point is especially important in the calculation of holidays in the final settlement with prorated extra payments, as it can affect the final amount.

3. Extra payments (if not prorated)

If you receive extra payments in summer or at Christmas and they are not included in your monthly salary, you will be entitled to the corresponding proportional part up to the contract end date.

For example, if you are dismissed halfway through the year, you will be entitled to approximately half an extra payment.

4. Overtime or outstanding items

If you have worked overtime or have outstanding incentives, bonuses, commissions or any other financial item, they must also be added to the final settlement.

It is important to review both the payslip and your contract to make sure nothing is left out.

5. Withholdings and deductions

The final settlement is not received “clean”: withholdings such as income tax and social security contributions are applied to the total. That is why the final amount may be lower than the sum of all the items.

Practical example of a final settlement calculation

To make it clearer, here is a simplified example:

The corresponding withholdings would have to be subtracted from this total, which will depend on your tax situation and on the company.

Common mistakes when calculating the final settlement

Although the process may seem simple, there are frequent mistakes that are worth avoiding:

• Not including untaken holidays.
• Forgetting the extra payments.
• Not correctly reviewing the days worked.
• Not taking legal deductions into account.

Reviewing each item in detail is key to avoiding unpleasant surprises.

Know your rights and avoid mistakes

Calculating your final settlement correctly not only ensures that you receive what you are entitled to, but also allows you to close a professional stage with peace of mind and without surprises. Although it may seem complicated at first, following a clear method and knowing each item will give you an accurate estimate and confidence when reviewing what the company offers you.

In the end, it is about being in control of your rights: understanding what you are entitled to and how it is calculated allows you to negotiate with confidence and make sure your departure is fair and transparent. Because, just as we take care of the details that make our day to day more comfortable, taking care of these professional aspects is also a way to protect your professional wellbeing.