Formula to calculate a severance payment

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Overtime
Overtime is only applied if the employee uses this benefit and has to receive any unpaid amount. The lump sum is calculated by multiplying the additional hours worked by the hourly rate specified by the company and the collective agreement.

Compensation (if applicable)
Finally, any applicable compensation must be included. This refers to compensation that applies if we are talking about an objective dismissal, for economic, organizational or production reasons. It also applies to unfair dismissals or when the contract is terminated by mutual agreement.


To understand how severance pay is calculated, it is best to look at the procedure through an example. Let's imagine that a worker has a monthly salary of €2,000 and was fired from his job on October 20. The person received an additional payment of €1,500 every six months of the year as a bonus and had accrued but unused vacation time.

1. Pending salary
In this case, the calculation starts with the outstanding daily wage. We first need to know how much money the employee earned per day, dividing the €2000 by 30 days. This gives us a result of €66.6/day.

Since he was fired on October 20, it means that he has to receive payment for the last 20 days worked. The above amount must be multiplied by the number of days pending, which gives the following result:

Pending salary = (66.6 € / day) x (20 days) = 1332.00 €

2. Unused vacations
For every 360 days of work, employees are entitled to 30 days of vacation. However, since the employee did not complete his year of work, he is entitled to slightly less. From the beginning of the year to October 20, 293 days have passed.

Knowing this information, we carry out a rule of three, which tells us that the employee is entitled to 24.42 days' pay for his vacation:

(30 days / 360 days) x (293 days) = 24.42 days

We multiply this by the daily payment we obtained in the previous list of austria cell phone number example and it gives us the following result:

Unused holidays = (66.6 € / day) x (24.42 days) = 1626.37 €

3. Extra payments
The employee receives €1,500 every six months, so we need to know how much would be due if this payment were made daily. To do this, we divide the amount by the 180 days, which gives a result of €8.33/day.

From July 1 (when the last payment was received) to October 20 (when the employment relationship ended), 112 days passed, so the corresponding payment is obtained by multiplying those days with the daily amount we obtained, which means:

Extra payments = (€8.33/day) x (112 days) = €932.96

4. Deductions for personal income tax and social security
When calculating the severance pay, we obtained the result that the employee should receive €3,891.33:

€1,332.00 + €1,626.37 + €932.96 = €3,891.33