Job Litigation Salary Calculation

The system calculates job litigation salaries as part of the regular payroll process. The payroll process differentiates between whether an employee is in a regular period or period for job litigation salary. When the system makes this differentiation, it determines which elements the payroll process needs to resolve. When calculating job litigation salary, the payroll process calculates payroll for the periods affected by job litigation, considering only the earnings elements that are defined for job litigation salary. To calculate job litigation salary, the payroll process uses the following equation:

Job Litigation Salary = Units * Rate

Where

Units = Number of days to pay for job litigation salary

Rate = Daily gross salary for days of job litigation

Calculation of job litigation salary is the same as normal workdays except for the calculation of daily salary. The system calculates daily salary in one of two ways:

• If the employee and employer come to an agreement during litigation, the system calculates the daily salary for job litigation through the following method:

  1. When a termination occurs, the system stores the job litigation daily salary in the termination results table through an accumulator. This accumulator determines which earnings contribute to the job litigation salary.

  2. When the system calculates job litigation salary, it retrieves the value from the previously mentioned accumulator using a historical rule, and then the system multiples this value by the number of days to pay in the litigation period.

• If the judge imposes an amount for job litigation salary, the system divides this amount across the number of days that are considered part of the job litigation period to obtain the daily job litigation salary.

  If this is the case, you can overwrite the amount that the system obtains from the relevant accumulator by entering the amount imposed by the judge on the Termination Management ESP page. The sentence amount imposed by the judge overrides any amount the payroll process calculates. The system divides the amount imposed by the sentence across each month affected by the job litigation salary to correctly calculate the social security contributions and taxations.

Job litigation salary earnings are applicable to both social security contributions and IRPF taxation. Employers must therefore report litigation salary to social security. When you run the payroll process for the employee during the month of the job litigation sentence, the system calculates all job litigation salary as retroactive pay (if the salary corresponds to past periods) for all payroll periods that are part of the job litigation period, including prorated extra periods, and applies the related social security contributions and taxations to each affected month. Social security contributions corresponding to litigation salaries are reported under a specific code (L02) in the TC2 report.

If the judge determines that the employee was wrongfully terminated and that the employer must rehire the employee, the readmitted employee must return the payment amount received for severance pay to the company, and must return the unemployment benefits received for the period affected by job litigation directly to the national employment institute (Instituto Nacional de Empleo [INEM]). The process considers the readmitted employee's salary for the period affected by job litigation as normal worked days.