Severance pay is a statutory payment made to an employee, or to the employee’s heirs in case of death, when the employment contract ends under conditions specified by law and the employee has completed the minimum required period of service.
In general, entitlement requires at least one year of work under the same employer and termination of the employment contract in a manner that gives rise to severance pay. Examples include termination by the employer without just cause, termination by the employee for justified reasons, military service, retirement conditions, marriage of a female employee within the statutory period, or death of the employee.
The basic formula is the employee’s last gross wage, including continuous monetary benefits, multiplied by the length of service. Periods exceeding a full year are calculated proportionally by month and day.
The annual severance amount may not exceed the statutory severance pay ceiling. Stamp tax is deducted from the calculated amount to reach the net severance pay.