Calculating the Settlement: What It Includes and How to Calculate It

What the settlement is

The settlement (finiquito) is the document that liquidates the pending amounts the company owes the worker when the employment relationship ends, whether by voluntary resignation, dismissal or end of contract.

What concepts it includes

• Salary for the days worked of the last month up to the termination date.
• Proportional part of the extra payments not yet paid.
• Untaken accrued holidays.
• Other pending concepts (commissions, overtime, etc.).

The settlement does not include the dismissal compensation: they are different concepts that may appear in the same document.

How it is calculated, step by step

1. Days worked: daily salary × days of the last month up to termination.
2. Extra payments: proportional part accrued since the last payment.
3. Holidays: days accrued and not taken, valued according to the salary.
4. Add all concepts and apply the corresponding withholdings.

Settlement and compensation

The settlement and the dismissal compensation are different things. The settlement liquidates what is accrued; the compensation offsets the termination in the cases that give the right to it. They can appear together in the settlement document.

With RegulaKit controlling working hours and holidays makes it easier to correctly calculate what is accrued in the settlement. Discover it on our platform.

Conclusion

The settlement liquidates pending salary, extra payments and untaken holidays. Calculating it well and distinguishing it from compensation avoids conflicts when the employment relationship ends.