Terminating Employment in Spain: Notice & Severance

Spanish law recognises a few main routes. An objective dismissal (despido objetivo) is for justified economic, technical, organisational or production reasons, or certain individual grounds, and carries statutory severance. A disciplinary dismissal (despido disciplinario) is for serious misconduct by the employee and, if proven, carries no severance. A collective dismissal (despido colectivo, or ERE) applies when a certain number of roles are cut and follows a separate consultation process.

There is also termination by mutual agreement, and the natural end of a valid fixed-term contract. The route you use determines everything that follows, so the first decision is always which type of dismissal genuinely applies.

For an objective dismissal, the statutory notice is 15 days. Because the vast majority of Spanish employees are covered by a collective agreement, and many convenios extend notice to 30 days or more, the applicable convenio should always be checked before serving notice. If the employer does not give the required notice, it must pay salary in lieu for the missing days.

Disciplinary dismissals take effect on communication, without a notice period, but they must be set out in a formal letter stating the facts and the date. Procedure matters as much as the reason: a valid ground delivered through the wrong process can still be found unfair.

Severance, the indemnización, is based on length of service. For a fair objective dismissal, it is 20 days of salary for each year of service, with part-years counted proportionally, capped at 12 months’ salary. For a dismissal found to be unfair, it rises to 33 days of salary per year of service, capped at 24 months.

A fair disciplinary dismissal, where serious misconduct is proven, carries no severance at all. Employees who joined before 12 February 2012 may have part of their entitlement calculated at an older, higher rate for their pre-2012 service, a transitional rule worth flagging for long-tenured staff.

A dismissal is unfair, or improcedente, when the employer cannot justify the stated grounds or does not follow the correct procedure. If an employee challenges the dismissal and a court agrees, the employer must either reinstate the employee with back pay or pay the enhanced severance of 33 days per year of service, capped at 24 months. In most cases the choice between the two lies with the employer.

This is why classification and process matter so much. The gap between a 20-day objective settlement and a 33-day unfair award, plus back pay, is exactly what a well-run dismissal avoids. When there is real doubt, employers sometimes acknowledge unfairness up front and pay the 33-day figure to close the matter cleanly.

Take an employee on 40,000 euros a year, so roughly 109.6 euros of salary per day, with four years of service.

The numbers are illustrative and simplified, but they show why the classification is worth getting right: the same four-year employee costs roughly 8,770 euros or 14,470 euros depending on whether the dismissal stands. For how this fits the overall cost of a hire, see what it costs to employ someone in Spain.

As the legal employer, the EOR runs the termination process. It advises on the correct type of dismissal, drafts the letter, serves the right notice, calculates and pays the correct severance, and files what is needed with the authorities. You make the business decision that the role should end; the EOR makes sure the exit is handled to the letter of Spanish law.

That is where the value shows on the way out as well as the way in. A compliant, well-documented exit sharply reduces the chance of an improcedente finding and the enhanced severance that comes with it.