Severance Pay Calculation

The system contains all of the logic to determine the severance pay amount based on the legal rules for seniority days to pay per year of service. The payroll process calculates the amount to pay the employee in indemnity through the following equation:

Severance pay = Number of Days * Daily Salary for Indemnity

Where

Number of Days = Minimum value of {(Days by Year * Number of Worked Years) or (Maximum Number of Periods * 30)}

The payroll process determines the number of days to pay by taking the lesser value of either (a) the multiplication of days by year of service by number of worked years, or (b) the maximum number of periods by 30. The resulting values vary depending on contract type and termination reason. Note that the Days by Year value is prorated if the year is not complete.

If the employee is in probation period when he is terminated, the employee does not receive severance pay. The system uses the value in the Probation Period field on the employee's labor agreement to make this determination.