Cessantia -Guide to doing business

Cessantia

Cessantia is the severance payment (a onetime monetary compensation) an employee might be entitled to by law, if his employment agreement is terminated through no fault on his part or for a reason that cannot be attributed to the employee provided the employee has been employed for at least one year). This cessantia payment is calculated based on the years of service. The employee must claim his cessantia pay within one year after termination of the employment agreement.

Pursuant to the Cessantia Ordinance, the amount of cessantia is calculated as follows:

For the 1st until the 10th year of service: 1 week’s salary per year of service;
For the 11th until the 20th year of service: 1 ¼ week’s salary per year of service;
For each of service after the 20th year of service: 2 week’s salary per year of service over 20 years.

For employees who will become entitled to a pension or general old age pension after termination of their employment agreement, they will only become entitled to cessantia, provided that (i) the pension is not less than the old age pension and (ii) if the old age pension, when deducted from the pension, is not less than twice the amount of the old age pension applicable at that time.