Thursday, 16th July 2020

This Month's Magazine
Ending Employment Contracts

Ending Employment Contracts

Even if the termination is amicable, the paperwork that follows can be a headache.

When the contract is not renewed Workers employed for more than 6 months need to be given 15-day notice of nonrenewal. This must be a written notice which
includes details of all the documents and payments that the employee will receive on the last day of work, namely:

  1. Pending Salary
  2. Un-taken holiday pay
  3. Redundancy payment (Finiquito) The redundancy payment is 9 days per each year employed by the company.


  1. Latest wage-slip
  2. Redundancy report where all categories of payments are specified.
  3. “Certificado de empresa” where the last 6 month contributions to Social Security are listed.

Disciplinary measures
A contract may be terminated due to gross misconduct or disrespect of the company despite repeated warnings. Here are some examples:

  • Repeated and unjustified absenteeism or lateness
  • Abuse of trust in contractual relationship with the employer
  • Stealing from the company
  • Lack of discipline or disobedience at the workplace
  • Verbal or physical abuse toward the company or its employees or families
  • Repeated Skiving
  • Drinking or drug abuse
  • Racial or other discrimination

The reasons for termination must be clearly stated and must be valid enough to stand up in court, if need be. Make sure you have evidence i.e. witnesses, documentation of the offense, video recordings etc.


In serious cases, you must explain the facts in writing to the employee including the date which the dismissal will take effect. This must be done within a maximum period of two months (60 days) from the date of the offense which leads to the termination of the contract.
A notification period is not required and no redundancy payments.

Dismissal for justified reasons other than disciplinary A one month notice must be issued to the worker in writing, specifying the reasons for the dismissal. The causes for objective dismissals are:

  • Inefficiency of the worker: This is controversial and is rarely used since it is difficult to demonstrate the ineptitude of an employee before a court.
  • Lack of adaptation to modifications: Failure & inability to adapt to new technical innovations that have been implemented into the workplace If the
    situation persists after receiving adequate support and education, after 2 months, the employee may be dismissed.
  • Absenteeism: Absenteeism means, for example, more than two consecutive days of unexcused absence in the workplace.
  • Need to reduce labour force: For economic, technical, organizational or production reasons. This is the argument most used by the employer to lay someone off, and must objectively credit the need to reduce costs to maintain the business showing that dispensing with the worker will produce real savings in the company.

Dismissal with no objective reason (“Despido improcedente “)
The first step is to advise the employee in writing the facts and the dates of the dismissal. The employee then has a 20-day period when he has the right to sue the
employer. Verbal dismissals are inadmissible. On receipt of a claim the Court may classify the dismissal as follows:

Null dismissal: It is understood that the reason for the dismissal is due to some form of discrimination or a violation of the fundamental rights of the worker. The employer must readmit the worker immediately and pay the salary to include the duration of the litigation.

Dismissal: The judge considers that the employer has provided sufficient evidence for the disciplinary dismissal. This entails the termination of the contract with the employee without any compensation.

Unfair Dismissal: This is when the dismissal does not meet all the formal requirements. In this situation, the employer has the option to readmit the worker or pay a compensation of 45 days of salary per year worked, up to a maximum of 42 monthly payments.

Contact LImit Consulting for more information

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