How to Calculate Employee Contract Termination

On the initiative of the company or of the developer, contracts of work will close all the time, for several reasons. Therefore, knowing how to calculate employee termination is a must for any business .

It may be that the employee has found a new job , or that he or she is moving to another city, or that the company needs to wipe the team down in a time of crisis.

Many companies are targeted for labor claims for ignoring any severance pay or failing to meet payment deadlines . Therefore, this procedure must be done carefully.

So, now let’s see what it is and how to calculate contract termination :

What is contract termination ?

Contractual termination is the formalization of the termination of an employment relationship , either at the will of the employee or the employer .

At the end of this working relationship , both parties need to settle accounts . It is possible that the employee has overdue vacations , for example, in this case, he is entitled to receive for them at the end of the contract .

So, this termination involves a series of legal and tax procedures to fulfill the rights of the worker and the company , therefore, it is necessary to know how to calculate employee termination .

How to calculate contract termination ?

In addition to the legal termination procedure , termination also involves financial settlement with the worker , which is determined by calculating the termination of the contract .

Reaching the amount of severance pay is not simple, as it varies according to the situation of each employee. But it is important to know each of these variables and how they imply in the calculation . Understand:

Reason for termination

The termination of the worker can occur in three main ways, which can influence when it comes to processes such as calculating contract termination :

 Resignation request : on the employee’s own initiative , who loses the right to withdraw FGTS .

 Dismissal with just cause : at the initiative of the company , justified by a serious failure, which also prevents employees from withdrawing their FGTS .

 Dismissal without just cause : at the company’s initiative , for no specific reason, which allows the employee to withdraw the FGTS and still receive a 40% fine , due by the company , on the amount deposited in the fund .

Remember that the Service Time Guarantee Fund ( FGTS ) is a value deposited monthly by the employer to assist workers who lose their jobs . That is why resignation and dismissal with just cause make it impossible to withdraw the fund .

Early warning

Prior notice is the advance notice of termination by the employer to the employee , or vice versa.

From this notice, a period of work lasting between 30 and 90 days is fulfilled , according to the length of service (for unfair dismissals , the worker gains 3 additional days for each year worked, in addition to the minimum of 30 days).

In cases of dismissal with just cause , the employee loses this benefit . In the case of resignation or dismissal without cause , the company must choose one of the options:

 Prior notice worked : the worker fulfills the period exercising his activities.

 Indemnified prior notice : the worker is dismissed at the time of dismissal .

In both cases, the employee receives his wages normally, and prior notice is considered in the calculation of termination as time worked , that is, it makes up the vacation count and 13th salary , for example.

However, if it was the employee who resigned and did not want to comply with the notice , the company does not need to include this amount in the calculation .

Wage balance

The salary balance refers to the remuneration of the days worked in the month of the contract termination , since the payment of the last salary .

To calculate this amount , you must divide the salary by the number of days in the month of termination . The result, then, must be multiplied by the number of days worked in that month.

13th salary

The worker is also entitled to receive the 13th salary in proportion to the months worked until the moment of termination.

To make this calculation , the value of the 13th salary must be divided by 12. The result will then be multiplied by the number of months worked since January. In the last month, if the employee works more than 15 days (counting from the day of admission ), the full month is considered in the calculation ; if you work less than 15 days, the month is discarded.


Vacations are also an employee’s right and must be included in the termination calculation . If he has an overdue vacation , the amount of a salary plus a third must go into the account .

In addition, he must also receive for proportional vacations , that is, that have not yet been taken. For this calculation , the same logic as the 13th salary (months worked) and the 15-day rule are used.

Overtime and additional hours

In the labor settlement also they go the extra hours are worked and not paid or untaken if the worker lives up to them. To define the amount of overtime , you must first divide the salary by 220 (number of hours worked during a month, according to the CLT ).

If the worker has overtime during business hours, he must receive at least 50% more than the amount resulting from this division. For nightly surcharge (between 10 pm and 5 am), 20% is added. In the case of Sundays and holidays, the amount of overtime doubles.

There, now you know how to calculate contract termination and the main variables of the process. In practice, however, it can involve many other values , so it is important to have a quality accounting service  to do this safely.

This way, you avoid any mistake that can trigger labor lawsuits and can still correctly assess the impact of a layoff on your company’s finances .

by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

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