The SEPE tightens up access to unemployment benefits by counting part of the severance payment as income

The State Public Employment Service (SEPE) is applying a more restrictive criterion in the access to unemployment benefits when the dismissed worker receives a compensation higher than the legal minimum foreseen in the Workers' Statute. According to this criterion, the excess compensation over the legal amount may be counted as income, which may prevent access to welfare assistance if the established income limits are exceeded.

Unemployment benefit is a welfare benefit aimed at people who have exhausted their contributory benefit or are not entitled to it and who, among other requirements, must not exceed certain income limits, generally set at 75% of the Minimum Interprofessional Wage (Salario Mínimo Interprofesional).

1. SEPE's interpretation of severance pay

The regulations state that statutory severance pay, the minimum amount set by labour legislation, is not considered income for the purposes of unemployment benefit. However, when the severance pay received by the worker exceeds this minimum amount, the SEPE may consider the additional part to be income that can be taken into account.

This interpretation implies that a worker who receives a higher compensation by agreement with the company or by court decision could exceed the required income limit, which would lead to the denial of the benefit.

2. Consequences for access to welfare benefits

The application of this criterion has relevant effects in practice. In certain cases, a dismissed worker who has negotiated a higher severance payment than the statutory severance payment may find that:

• does not meet the income requirement,
• and, consequently, the SEPE refuses to grant unemployment benefit.

3. Difference between statutory compensation and overcompensation

The legal key lies in distinguishing between two concepts:

• Statutory severance pay: this is not considered income and does not affect entitlement to benefit.
• Excess over the legal severance pay: this can be counted as income for the purposes of calculating income.

Therefore, although receipt of the minimum compensation established by labour legislation does not prevent access to the benefit, higher compensation may alter the applicant's economic assessment and block access to the benefit.

Conclusion

The criterion applied by the SEPE introduces a relevant element in the relationship between dismissal and subsequent economic incentives. Although the legal severance pay continues to be excluded from the calculation of income, the excess over that amount may prevent access to unemployment benefit if it causes the worker to exceed the established economic limits. This interpretation reinforces the welfare nature of the benefit and makes its granting conditional on the real existence of a situation of economic need.

Article written by ECIJA Madrid Labour Law Department.