The Supreme Court clarified how severance pay that is scheduled to rise over many years, even when secured by an insurance policy, should be treated for unemployment benefits purposes. It ruled that such payments cannot be counted as income when determining eligibility for unemployment benefits.
Previously, the State Public Employment Agency had denied benefits by treating the severance formula as income under current tax rules. This approach implied that the income level could narrow or bar access to unemployment benefits, even when the worker was otherwise unemployed.
The court confirmed that, under the General Social Security Law, statutory severance compensation is not considered income for unemployment calculations. Consequently, regardless of how the payment is structured or delivered, it should not be used to decide whether more than 75 percent of the worker’s income has been earned in the context of the benefit threshold under the relevant wage framework. This is particularly important for calculations tied to the Minimum Interprofessional Wage, which stands as the key eligibility marker.
In the specific dispute before the Supreme Court, the agreement between Piaggio and SCP España set the total severance amount at 209,471 euros. The arrangement provided for payments that rose over time, from 1,775.67 euros per month to 4,104.57 euros per month. The employer began these payments in September 2012 and completed them in July 2019. To guarantee the deferred payments, the employer arranged an insurance policy with the worker named as the beneficiary.
Filed when reporting what was received
INEM granted a 720-day subsidy and signed a Special Agreement with the Undersecretariat of the Treasury of the National Social Security Institution. This agreement included a monthly contribution of 679.36 euros intended for future retirement calculations. If the insurer verified compliance with the life policy and capital gains provisions, the worker received a gross payment of 6,077.18 euros, from which 1,200.24 euros were withheld as personal income tax and were reported to the Treasury. A file was opened to assess eligibility for further aid, which later raised questions about the suitability of continued support.
A Barcelona court initially ordered the public body to provide the administrative case file for the amount of 9,372 euros claimed by the worker, arguing that these were fully lawful unemployment benefits for a person over 52 years old and that the right to continue receiving the subsidy should be maintained. The High Court of Catalonia, however, reversed this decision and ruled in favor of SEPE.
The Supreme Court has now consolidated its doctrine: the deferred, staggered collection of severance pay does not affect the entitlement to unemployment benefits. The crucial point is that a change in payment amount does not alter the fundamental nature of the severance, and therefore it should not disrupt benefit eligibility.
In sum, the ruling reinforces that severance compensation, even when delivered through a time-spread structure and backed by an insurance policy, does not count as income for unemployment benefit calculations. This clarifies how workers on long-term settlements are assessed against income thresholds, ensuring that the nature of severance payments remains distinct from earned income for the purposes of unemployment support. [Source: Supreme Court ruling, context and implications for social security administration and unemployment policy.]