An area director on 120,000 euros a year with fourteen years at the company receives 151,890.41 euros, tax-free, for an unfair dismissal if the contract is an ordinary one. If it is a senior management contract that says nothing else, the company can let the director go by paying 32,219.18 euros plus three months’ notice, and if it dismisses for misconduct and the court rules it unfair, 92,054.79 euros. Which contract you really have does not depend on the title on your business card, and it is the first thing we check.
Dismissals of managers, executives and specialists at companies in A Coruña and Arteixo, in any sector and including textiles and retail, are handled by Ana María Reza Cortiñas, member no. 6064, and Luis Jurado Cano, member no. 6317, of the A Coruña Bar Association and partners at Perseus & RC Abogados, in English if you prefer. At high salaries, the difference between negotiating the exit well and signing the document put in front of you is measured in tens of thousands of euros, and the time to react is the same as for any other dismissal, twenty working days.
Senior management or ordinary contract
Senior management is a special employment relationship governed by Royal Decree 1382/1985, with much lower severance than under the Workers’ Statute. It only exists when the person exercises powers belonging to the ownership of the company, over its general objectives and with full autonomy, answering only to the board of directors or the highest governing body. Many contracts are headed senior management although the person has no such powers, and in those cases what counts is what the person actually did, not the contract’s title.
If you were promoted from within the company or the group, your previous ordinary contract may only be suspended. That is the rule unless the senior management contract says it replaces it, and even then the replacement only takes effect after two years. When the senior management role ends you can return to your previous post, without losing any severance due, unless you are dismissed for misconduct that the court finds proven.
A senior manager can also leave with the withdrawal severance if the company changes hands and that renews its governing bodies or changes its main business, provided it is done within three months. In a takeover or merger that deadline is worth checking before it passes.
Which salary counts
Severance is calculated on everything paid for your work, of which the fixed pay on the payslip is only one part. That includes extra payments, allowances, variable pay received regularly, which as a general rule is spread over the months of the last year, and benefits in kind such as a car or health insurance when they are part of your pay and not just a work tool. For senior managers the statutory severance is calculated on cash salary.
The bonus for the year of dismissal is one of the most disputed items. It depends on how the objectives plan is drafted, whether the targets were met and what it says about leaving before the payment date, and it is claimed together with the dismissal or in the negotiation. Share and option plans work similarly. They usually distinguish between leaving for reasons attributable to the employee and other exits, and the exit agreement should state expressly how yours is treated, because that decides whether you keep or lose what has not yet vested.
Non-compete and retention clauses
A post-employment non-compete clause only binds you if the company has a genuine industrial or commercial interest, pays you adequate compensation and it lasts no more than two years for technical staff or six months for other employees. If it is valid you must respect it, and the company must pay you. Before accepting another offer, check what yours says and whether you are being paid for it.
A retention agreement, which can require you to stay up to two years when the company has paid for specialist training, only entitles the company to compensation if it is you who leaves early. If the company dismisses you, it does not oblige you to repay anything.
Tax and unemployment benefit
Statutory severance is exempt from Spanish income tax up to 180,000 euros, but only if the unfairness is recognised at conciliation or in a judgment, and provided the exit is genuine. Anything above that limit, and anything agreed above the statutory severance, is taxed as employment income, with a 30 % reduction if you had been with the company more than two years, applied to at most 300,000 euros and phased out above 700,000. The dismissal calculator separates the exempt part from the taxable part. If you are on the Beckham regime the exemption does not apply, as explained on the foreign employees page.
How you leave also decides unemployment benefit. A resignation or mutual agreement gives no right to it, and the amount paid is not exempt. If the company wants to agree your exit, what protects you is a dismissal whose unfairness is recognised at the conciliation hearing, with the amount and everything else agreed in writing.
Negotiating the exit
When a company proposes an agreed exit it usually brings the document already drafted and asks for a signature the same day. Do not sign anything as agreed until we have seen it. What is negotiated besides the money is often worth as much, the treatment of shares and bonus, the release or payment of the non-compete, the leaving date, how the exit is announced internally and the reference letter.
Dismissals of people working in Arteixo and the surrounding area are heard by the A Coruña employment courts. We are at Rúa Torreiro 13, 3.º C, A Coruña, we work in English and by video call, and you can call or WhatsApp us on +34 677 841 007. General information is on the dismissals page.
Frequently asked questions
Am I a senior manager if my contract says director?
Not necessarily. Only someone who exercises powers belonging to the ownership of the company over its general objectives, with autonomy and answering only to the board or the highest governing body, is one, under article 1.2 of Royal Decree 1382/1985. An area, department or store director who reports to another executive usually has an ordinary contract, with severance of thirty-three days per year.
How much does a senior manager get if dismissed?
Whatever the contract says. If it says nothing and the company withdraws from the contract, seven days' pay per year up to six months' pay, plus three months' notice or its value. If the company dismisses for misconduct and the court rules it unfair, twenty days per year up to twelve months' pay.
Does my bonus count towards severance?
Yes, when it is part of your salary. Severance is calculated on everything paid for your work, including what is not in the fixed pay on the payslip, and variable pay received regularly is, as a general rule, spread over the months of the last year. It is the factor that changes the figure most for a salary with a large variable part.
Do I have to respect my non-compete clause if I am dismissed?
If it is valid, yes, and the company must pay you the agreed compensation. It is only valid if the company has a genuine industrial or commercial interest, pays adequate compensation and it lasts no more than two years for technical staff and six months for others, under article 21.2 of the Workers' Statute. A clause with no compensation, or a token one, does not bind you.
How much tax do I pay on my severance?
None up to 180,000 euros, if it is the statutory amount and the unfairness is recognised at conciliation or in a judgment. Anything above 180,000 euros, or agreed above the statutory amount, is taxed as employment income with a 30 % reduction if you had been with the company for more than two years, applied to at most 300,000 euros.
Should I sign a voluntary exit by mutual agreement?
Hardly ever. A resignation or mutual agreement gives no right to unemployment benefit, because it is not legal unemployment, and the amount paid stops being tax-exempt. If the company wants to agree your exit, what protects you is a dismissal whose unfairness is recognised at the conciliation hearing.