Severance pay
is compensation owed to an employee on termination, separate from notice. Some countries mandate formulas (France, Spain, most of the Middle East), some award it through courts or social plans (Germany), and some owe nothing statutory for fair dismissal (UK beyond redundancy, Switzerland in most cases). The spread across countries is enormous — budgeting requires a per-country map.
How does severance pay work across jurisdictions in 2026?
Three regimes coexist. Formula states: statute prescribes an amount per year of service — France’s licenciement indemnity (a quarter of a month per year for the first ten), Spain’s 20 days per year for objective dismissal (33 for unfair), the Gulf’s end-of-service gratuity. Negotiation states: Germany has no general statutory severance, but works-council social plans and dismissal-protection litigation produce the customary half month per year. Minimal states: the UK owes statutory redundancy pay only in redundancy situations; Switzerland owes severance only in narrow legacy cases.
Caps and bases differ as much as formulas: some states cap qualifying salary, others cap total months, and the salary base may be basic-only or include allowances.
| Country | Statutory position (2026) | Typical scale |
|---|---|---|
| France | Mandatory indemnity | 1/4 month per year (first 10), 1/3 beyond |
| Spain | Mandatory for objective/unfair dismissal | 20 / 33 days per year, capped |
| Germany | No general statute; social plans & settlements | ≈ 0.5 month per year (custom) |
| UK | Redundancy only | Capped weekly pay × age factor × years |
| Switzerland | Generally none (legacy Art. 339b cases rare) | Pension system replaces it |
| UAE / GCC | End-of-service gratuity | 21/30 days per year — see gratuity |
When is severance actually owed?
Trigger patterns to check before any termination:
- Ground of dismissal: economic and no-fault terminations trigger formulas; misconduct dismissals may reduce or eliminate them — within limits courts police closely.
- Collective thresholds: multiple dismissals can trip collective-redundancy procedures with consultation duties and enhanced packages.
- Contract and CBA layers: individual contracts and sector agreements often promise more than statute — the highest applicable layer wins.
Severance interacts with notice (they stack, not substitute), with unfair-dismissal exposure, and with releases: in many states a settlement agreement buying litigation peace is the real cost driver, not the statutory formula.
Costing exits before you commit to them
For workforce planning, carry severance as a known liability the way Gulf employers carry gratuity: a France- or Spain-heavy team has a materially higher exit cost per head than a UK- or Swiss-based one, and restructurings should be costed per country before decisions, not after. Access Financial manages compliant terminations — grounds, notice, severance and settlement documentation — across 60+ countries; request a termination cost estimate before you commit to a plan.
FAQ
The questions clients and contractors ask us most.
Is severance pay mandatory everywhere?
No — the spread is wide. France, Spain, Italy and most Middle Eastern states mandate formulas; Germany reaches similar outcomes through social plans and settlements without a general statute; the UK owes statutory pay only for redundancy; Switzerland generally owes none, its second-pillar pension having replaced the old scheme. Never extrapolate one country’s rule to another.
How is severance calculated in France?
The statutory licenciement indemnity is one quarter of a month’s salary per year of service for the first ten years and one third beyond, based on the more favourable of the last three or twelve months’ average pay — with collective agreements frequently improving on it. Unfair-dismissal damages under the Macron scale sit on top as a separate exposure.
Does severance apply to resignation?
Statutory severance generally compensates employer-initiated termination, so resignation earns nothing in most European systems. The main exceptions are the Gulf’s end-of-service gratuity, which accrues to resigning employees too, and constructive-dismissal cases where a resignation is legally treated as a dismissal. Contractual schemes can be more generous by design.