How Is Severance Pay Calculated?
The essentials you need to know about eligibility for severance pay, the calculation method, and the 2026 ceiling amount.
Severance pay is one of the topics employees ask about most. In this article we outline the conditions for eligibility and the method of calculation.
Who is entitled to severance pay?
To qualify for severance pay, an employee must have worked for the same employer for at least one year and the employment contract must have ended in one of the ways specified by law. For example:
- Termination by the employer without just cause
- Termination by the employee for just cause
- Departure due to retirement, military service, or marriage (for female employees)
How is it calculated?
Severance pay is calculated on the basis of 30 days of the employee’s last gross wage for each full year worked, with pro-rata calculation for partial years. The calculation considers not only the base wage but also regularly paid benefits such as bonuses, transport, and meal allowances.
The amount payable for each year cannot exceed the statutory severance pay ceiling, which is updated every six months.
What to do in case of a dispute
Mediation is mandatory for unpaid or underpaid severance. If no agreement is reached, a claim may be filed with the labor court. Managing the process correctly is critical to avoiding loss of rights.
This article is for general information only. Contact us for an assessment specific to your situation.