At the BELZUZ ABOGADOS Labour Law Department in accordance with our legal practices and our prior experience, we have deemed particularly interesting the matter of the compensation scheme and base salary for redundancy in the case of the staff under expatriation scheme, known as “expatriates”.
As we have been repeating in past publications, in order to solve the question raised, our starting point must be the settled case-law of the Spanish Supreme Court regarding the base salary for redundancy, which is: “the salary received the previous month, with pro-rata extraordinary pays, except in special circumstances”, as it is repeated by the Supreme Court in its ruling of 29 January 2019, which we will comment below.
The Supreme Court ruling starts from the rebuttable presumption that everything that the employee receives from the employer is due as salary and the ruling may be rebutted, either through evidence that the paid amount follows one of the reasons stated on art. 26.2, or proving that the payment is established as compensation under an agreed rule (norma paccionada). On this presumption, the Supreme Court includes the well-known expatriation bonus or allowance, as a part of the base salary for redundancy, as it is a special circumstance affecting that kind of workers.
However, it is worthwhile qualifying the specific case judged by the Supreme Court ruling, due to the singularity of the secondment ending four months before the dismissal.
This would a priori exclude such a base salary allowance (see, for instance, the ruling by the Madrid High Court of Justice of 30 January 2014), unless there is evidence of fraud if a dismissal is postponed to avoid such a bonus (see the ruling by the Madrid High Court of Justice of 17 June 2015), but what is new in the Supreme Court ruling commented is that even with the secondment ending four months before, the Court understands that the allowance must be included in the base salary for redundancy proportional to the months corresponding to the year before the dismissal, when the allowance was received (i.e., the average annual bonus to calculate compensation).
The ruling commented also reminds the Court ruling of 19 July 2018 that highlights that for the purposes of severance pay or agreement termination, housing payment by the company is accounted, because its salary nature is not determined by the voluntary secondment but by its temporary indefinition that entails housing rental as an ordinary need while providing services.
To sum up, as labour lawyers with expertise in disputes arising from expatriate dismissals and agreement terminations, our advice for expatriate employees and managers, who are subjected to a dismissal with a certain temporary link between the return and the dismissal, is getting the appropriate legal advice regarding the correct severance pay that may be applied to them and court claims.
On the side of companies, it is highly recommended the legal review of their expatriate compensation schemes in the light of the case law established by the Supreme Court after its rulings of 29 January 2019 and 19 July 2018.
At the BELZUZ ABOGADOS, S.L.P. Labour Law Department, we are available for both employees and employers for the appropriate legal advice and support.
Belzuz Abogados SLP
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