The settlement payment is one of the most important documents you will sign during your working life, but also one of the least understood. Many workers sign it without knowing exactly what they are being paid or whether the amount is correct. This guide explains everything you need to know.
What exactly is the settlement payment?
The settlement payment is the economic liquidation that the company must pay the worker when the employment relationship ends, whatever the reason: dismissal, voluntary resignation, end of temporary contract or retirement.
It is not just severance pay. The settlement payment includes all pending economic concepts at the moment the contract ends:
- Salary for days worked since the last payroll
- Accrued but unused vacation days
- Proportional part of extra payments not yet paid
- Severance pay (when applicable)
When does severance apply and how much?
Severance is not always included in the settlement payment. It depends on the type of contract termination:
| Termination type | Severance |
|---|---|
| Unfair dismissal | 33 days/year (max 24 months) |
| Fair dismissal | Not applicable |
| End of temporary contract | 12 days/year |
| Voluntary resignation | Not applicable |
| Mutual agreement | As negotiated |
Important: For contracts signed before February 2012, years worked before that date are calculated at 45 days/year up to a maximum of 42 monthly payments.
What is salary for pending days?
If you are dismissed on the 20th of the month, you have worked 20 days that have not yet been paid because payroll has not been issued. Those 20 days must be included in the settlement payment.
The formula is simple:
Daily salary = gross monthly salary ÷ 30 Pending amount = daily salary × days worked since the last payroll
Unused vacation days
For each year worked, you accrue 30 calendar days of vacation (or the number established by your collective agreement if it is more favorable). If you are dismissed and have not taken all your vacation days for the current year, the company must pay you for those days.
Pending vacation days = (annual days ÷ 365) × days worked in the year
For example: if you have worked 180 days of the year and have 30 annual vacation days:
(30 ÷ 365) × 180 = 14.79 pending days that must be paid to you
The daily amount is your gross daily salary (gross monthly salary ÷ 30).
Is the settlement payment taxed in IRPF?
Yes, but not all of it is taxed the same way:
- Pending salary, vacation pay and extra payments: taxed as employment income.
- Legal minimum severance for unfair dismissal: exempt from IRPF up to the legally established amount (33 days/year with a limit of €180,000). The excess is taxed.
Can I refuse or sign the settlement payment as "not agreed"?
You have the right to not sign it if you believe the amount is incorrect. The company can deposit it in court, but that does not prevent you from claiming later.
You can also sign it with "no conforme" next to your signature. This is very important: in Spain, signing the settlement payment without reservation can be interpreted as waiving any future claim. With "no conforme" you remain protected.
How long does the company have to pay?
The settlement payment must be paid at the time the contract ends or the next day. If the company delays payment, you can claim late payment interest. If it does not pay at all, you have the right to go to the Labor Mediation, Arbitration and Conciliation Service (SMAC) or the labor court.
Calculate your settlement payment now
Do not wait for the company to tell you how much you deserve. Use our settlement payment calculator to obtain an estimate before the HR meeting. Being informed makes a difference.