How to calculate severance pay for retirement

Calculate severance pay for dismissal, most often, is not difficult for experienced and not very accountants. However, there are several points that still need to pay attention to both the employer and the retiring employee, depending on the situation and the institution from which the employee leaves.

Usually, upon dismissal at will, the employee is expected to pay unpaid for a certain period (most often, for the last month), and in addition , compensation for leave that was not used (if care was not immediately followed by leave). However, there are several reasons for dismissal, which require additional compensation, for example, with a reduction in the staff of the enterprise or its liquidation. The main parameter on which the severance pay depends on dismissal is the salary received for the last year of work, it is from it that the amount is calculated.

With a reduction, the employee must receive a payment equal to the average monthly earnings. At the same time, if he applies to the employment service within a period of not more than two weeks, but does not get settled for a new job, then this allowance is retained for him for three months. After that, during the same time, he will receive half his wages. However, an obligatory condition for this payment is the accounting in the institution engaged in the employment of the population and the periodic notes in it about why it can not be arranged.

If the employee was on seasonal earnings, then, with the reduction or liquidation of the institution, his two-week average salary is paid. In a more favorable respect, there are managers who, when dismissed for reasons beyond their control (change of ownership, decision of shareholders, etc.), receive three monthly salaries. Also benefits exist for those working in the Far North and in equivalent places, they can receive benefits for up to 6 months.

Thus, the calculation of severance pay for retirement is done as follows. First, the average daily earnings are calculated, by dividing the amount of wages (including various payments and bonuses for the past year) calculated for the calculated period by the number of days actually worked. The received number is multiplied by the number of working days for the period that the enterprise must pay to the employee. At the same time, holidays and holidays (as opposed to charging leave or sick leave) are not paid.

After the severance pay is added, it is necessary to determine other contributions and taxes. In the event that the benefit is fully consistent with what is stated in the Labor Code, there is no need to pay insurance premiums on them. If the organization decides to pay the amount that is higher than the amount specified in the legislative document, or in a situation not specified in it, it is necessary to calculate the insurance premiums accrued for compensation.

It should be noted that some categories of citizens have additional benefits, for example, increased severance pay for retiring servicemen when they reach retirement age or for health reasons, which can receive up to 20 salaries at a time, depending on the period of service. Also, certain categories of civil servants (judges, etc.) have preferential conditions for dismissal for reasons beyond their control. For them, payments are also increased.

On whether the severance pay is taxed upon the termination of personal income tax, the issue is controversial. In the event that the payment is made within the limit (three or six months, according to the TC), this tax is not collected from it. If the enterprise has decided to pay the employee in excess of the norm provided for by law, the amount exceeding the limit will be subject to personal income tax in full.