Retroactivity of severance payment should be estimated since 1997

The comeback of the retroactive nature of severance payments not only will be materialized upon the entry into force of the Labor Organic Law (LOT), but also acknowledge the last 15 years of service.

The law provides for retroactivity of severance payments since 1997.

In accordance with the second temporary provision, "the term of service to calculate the severance payment of active workers upon the entry into force hereof shall run since June 19, 1997, an unlucky day where the right to severance payment in proportion to the time of service based on the last wage was infringed."

Francisco Torrealba, a member of the Presidential Committee for the Labor Organic Law (LOT), explained that following the change in the scheme, the funds paid 15 years ago will favor workers. Moreover, the money deposited since 1997 in a trust fund will ensure payment at the end of the employment relationship.

In those cases where the employment relationship began after 1997, retroactivity will be effective from the first year of work.

Notwithstanding, the new scheme will mean sacrifices for workers. Upon the release of the law in the Official Gazette, the deposits of five days of wage on average received by workers on account of severance payment will be effective every three months instead of the first days of each month. Employees will be deposited a total of 15 days of wage every three months, as reported by Torrealba.

In the event of bankruptcy, severance payment shall take precedence over the payment of any other debt. "Workers will become privileged creditors. Employers will be liable even with their assets," he added.

Translated by Conchita Delgado