Severance pay for time of service is a non-waivable right of the Guatemalan worker, regulated by articles 82 and 84 of the Labor Code (Decree 1441). Although it sounds simple — "one month per year worked" — the actual calculation hides three details that completely change the result: what counts in the average salary, how to account for year fractions, and when it applies. Ignoring any of the three is what opens the door to a lawsuit in the labor courts.
Need the result now? Use the interactive calculator below. Further down you will find the detailed explanation of the formula, when it applies, step-by-step examples, and legal notes on vacation (Arts. 130-137 of the Labor Code).
Interactive severance and final settlement calculator
Enter the case data and obtain the complete breakdown under Art. 82 of the Labor Code. All calculations are indicative — for real cases, consult an attorney to validate specific contingencies.
What is severance pay in Guatemala?
Severance pay is an economic compensation that the employer pays to the worker when the employment relationship ends through no fault of the worker. Its purpose is to cover the transition period while the worker seeks new employment and to recognize the time of service provided to the company.
It is primarily regulated in article 82 of the Labor Code, which establishes that when the contract ends without cause attributable to the worker, they are entitled to severance equal to one month of salary for each year of continuous service, calculated on the average of the last six months.
When is severance pay due? — The 3 cases
1. Unjustified dismissal
The employer terminates the contract without cause or without being able to prove the invoked cause. It is the most common scenario. Full severance is paid, plus proportional benefits (Bono 14, Aguinaldo and vacation).
2. Resignation with just cause (Art. 79)
The worker resigns, but for cause attributable to the employer — for example: non-payment of salary, unilateral modifications to the contract, mistreatment, or serious breach of employer obligations. Full severance is paid. This is known as "indirect dismissal".
3. Simple voluntary resignation
The worker resigns by their own decision, without cause attributable to the employer. Severance is NOT paid, but proportional benefits are paid: Bono 14, Aguinaldo and accumulated vacation.
4. Justified dismissal (Art. 77)
The employer dismisses for proven worker cause (serious misconduct, abandonment, etc.). Severance is NOT paid, but proportional benefits accumulated up to the dismissal date are paid.
The official formula to calculate severance pay
The formula enshrined in the Labor Code, simplified, is:
Severance = Average Monthly Salary × Years Worked (with decimals)
Where each component has specific rules:
Component 1: Average Monthly Salary
Calculated over the last 6 months of the employment relationship, including:
- Ordinary salary (monthly base pay).
- Habitual commissions earned.
- Habitual overtime (not sporadic).
- Permanent bonuses that form part of the ordinary salary.
- Proportional share of Bono 14: monthly salary / 12.
- Proportional share of Aguinaldo: monthly salary / 12.
Important — what is NOT included:
- The Q. 250.00 incentive bonus (Decree 78-89 and amendments).
- Genuine travel allowances for verified expenses.
- Prior settlement or severance payments.
- Expense reimbursements.
The formula for the average monthly salary is:
Average Salary = Ordinary Salary + (Salary / 12) + (Salary / 12)
Which equals: Ordinary Salary × 1.1667
Component 2: Years Worked (with decimals)
Time is expressed in years with a decimal fraction for precision. The conversion is:
- Years: whole number of completed years.
- Additional months: divide by 12.
- Additional days: divide by 360 (or 365 depending on interpretation).
Formula:
Time in years = Years + (Months / 12) + (Days / 360)
Why are Bono 14 and Aguinaldo added to the average salary? Legal basis and case law
Many people — including some accountants and employers — calculate severance using only the ordinary salary, without adding the proportional share of Bono 14 and Aguinaldo. That calculation is legally incorrect and is one of the most frequent causes of labor lawsuits won by workers. The calculator in this article does include the sixth part (Bono 14 + Aguinaldo / 12 + 1/12 = ~16.67%) because that is the legal and case-law base currently in force in Guatemala.
To understand the exact legal basis, we must distinguish between written law — which has set this rule for the aguinaldo since 1978 — and the doctrine of the Constitutional Court, which consolidated the criterion to also include Bono 14.
1. The written legal basis: Decree 76-78
The article 9 of the Aguinaldo Benefit Regulation Law (Decree 76-78) already established, long before any ruling:
"For the calculation of severance... the amount of the proportional aguinaldo corresponding to the time of services rendered must be included."
— Art. 9, Decree 76-78
In other words, the inclusion of the proportional aguinaldo in the calculation base has been expressly regulated by law since 1978. It is not an interpretation, it is not a custom — it is positive text of the Guatemalan legal system.
2. The "landmark" ruling of the Constitutional Court — File 1630-2004
For Bono 14 (Decree 42-92), integration was consolidated through case law. The ruling most cited by labor attorneys is:
- File 1630-2004 · Ruling of August 31, 2005.
In this decision, the Constitutional Court reasoned that although Bono 14 and Aguinaldo are paid annually, their nature is benefit-related and salary-like. The Court indicated that the calculation of severance must use the integrated earned salary, which includes all ordinary and extraordinary remunerations, including the proportional shares of the annual bonuses.
3. Rulings that consolidate the doctrine
The "salary nature" criterion was reinforced by subsequent rulings that any attorney can cite in a brief or claim:
- File 1061-2010 · Ruling of August 10, 2010: the Court reiterates that the salary base for severance must be the integrated average salary. It explains that excluding Bono 14 and Aguinaldo would violate the principle of social justice and the non-waivability of labor rights.
- File 2822-2011: reinforces that the severance calculation base must include not only the monthly salary, but also one twelfth of what is received as Aguinaldo and Bono 14 — the famous "sixth part" that appears when adding both (1/12 + 1/12 = 1/6 ≈ 16.67%).
4. The three legal principles that support the doctrine
The reasoning of the Constitutional Court magistrates rests on three pillars:
- Unity of salary: salary is not just what the worker receives every 30 days, but the total of economic benefits the employer delivers in exchange for their labor during the year. Bono 14 and Aguinaldo are an integral part of that annual consideration.
- Principle of proportionality: if a worker worked one year, they accrued the right to one month of salary, one month of Bono 14 and one month of Aguinaldo. Therefore, their "month of severance" must be worth the equivalent of a real month of their working life, including those annual savings.
- Article 106 of the Constitution: establishes that in labor matters interpretation must always favor the worker (in dubio pro operario principle). Any doubt about the inclusion or not of a salary component must be resolved in favor of inclusion.
In summary
If you need to cite case law for a brief, claim or defense against a complaint, the most solid references are:
- Decree 76-78, Art. 9 — written legal basis for the proportional aguinaldo.
- File 1630-2004 (08/31/2005) — landmark ruling integrating Bono 14 and Aguinaldo into the severance base salary.
- File 1061-2010 (08/10/2010) — reinforces the integrated salary as the mandatory base.
- File 2822-2011 — confirms one twelfth of each bonus as a calculation component.
- Constitution, Art. 106 — interpretive principle in favor of the worker.
That is why the calculator in this article automatically applies the × 1.1667 factor to the ordinary salary before multiplying it by the days worked: this factor represents precisely the additional sixth part (1/12 Bono 14 + 1/12 Aguinaldo) that case law requires to be integrated into the calculation.
Step-by-step example — real case
Worker data:
- Time of service: 4 years, 7 months and 12 days.
- Monthly ordinary salary: Q. 6,500.00.
- Average commissions of the last 6 months: Q. 800.00 monthly.
- Incentive bonus: Q. 250.00 (not included).
Step 1 — Calculate the base salary for severance (last 6 months):
- Ordinary salary + commissions = Q. 6,500 + Q. 800 = Q. 7,300.00
Step 2 — Calculate the average monthly salary (with proportional Bono 14 and Aguinaldo):
- Proportional Bono 14: Q. 7,300 / 12 = Q. 608.33
- Proportional Aguinaldo: Q. 7,300 / 12 = Q. 608.33
- Average salary = Q. 7,300 + Q. 608.33 + Q. 608.33 = Q. 8,516.66
Step 3 — Convert time to decimal years:
- 4 years + (7/12) + (12/360) = 4 + 0.5833 + 0.0333 = 4.6167 years
Step 4 — Apply the formula:
- Severance = Q. 8,516.66 × 4.6167 = Q. 39,322.45
To this you add the proportional benefits for the current year (Bono 14, Aguinaldo and untaken vacation), which can add several thousand more to the total payment.
Other benefits added to the final settlement
When severance is paid, the current year's benefits not yet collected must also be settled. Each one has its own formula:
Proportional Bono 14
Accrual period: from July 1 of the prior year to June 30 of the current year.
Formula: (Salary × months worked in the period) / 12
Proportional Aguinaldo
Accrual period: from December 1 of the prior year to November 30 of the current year.
Formula: (Salary × months worked in the period) / 12
Untaken vacation
15 business days after one continuous year. If not taken at the time of termination, they must be paid in cash.
Formula: (Ordinary daily salary × 15 days) or proportional to months worked.
Common mistakes that generate lawsuits
- Forgetting to add Bono 14 and Aguinaldo to the average salary: the calculation comes out 16.67% below the legal amount. It is the #1 cause of lawsuits won by workers.
- Calculating on nominal salary instead of the 6-month average: if there were raises or variations, the average may differ.
- Excluding habitual commissions or overtime: even if not in the contract, if paid regularly, they form part of the salary.
- Rounding time to whole years instead of decimals: a difference of 6 months can be worth a full month of salary.
- Confusing the incentive bonus with a habitual bonus: the Q. 250 are not included, but a permanent monthly bonus is.
Worker's deadline to sue
If a worker believes their severance was miscalculated, they have 30 business days from the termination to file at the Labor Court (Art. 260 of the Labor Code). After that deadline, the right to demand the adjustment lapses — but not the labor benefits in general, which lapse after 2 years.
That is why, before paying a final settlement, it is worth double-checking the calculation. An hour of a labor attorney costs a fraction of what an adverse ruling costs.
Frequently asked questions
Does severance apply if the worker signs a final release?
The final release is valid if it correctly reflects the legal benefits. If it was signed waiving non-waivable rights (such as severance in unjustified dismissal), the release has no binding effect because Art. 12 of the Labor Code establishes that labor rights are non-waivable. The recommended practice is to sign the release before a notary and with a correctly calculated settlement.
What if the worker was on a fixed-term contract?
If a fixed-term contract is terminated before expiration without justified cause, the employer must pay the salaries owed until expiration, in addition to the accumulated benefits. The calculation differs from severance for time of service.
Is the incentive bonus included in severance?
No. The Q. 250.00 monthly incentive bonus (Decree 78-89) is expressly excluded from labor benefit calculations by legal mandate. It only counts as ordinary salary for the purposes of IGSS and payroll calculation.
What if the worker only worked 8 months?
Although the popular rule is that a full year is needed, Art. 82 establishes proportional calculation for fractions. For 8 months the severance would be: Average Salary × (8/12) = Average Salary × 0.6667.
Can I deduct worker debts from severance?
Only if they are documented and authorized in writing. Art. 100 of the Labor Code strictly limits deductions from salary, and severance has the same protection. Arbitrary deductions are a common cause of lawsuits that are lost.
Why are Bono 14 and Aguinaldo added to the salary to calculate severance?
Because Guatemalan law and case law require it. Article 9 of Decree 76-78 (Aguinaldo Benefit Regulation Law) expressly states that the proportional aguinaldo must be included in the severance calculation. For Bono 14, the Constitutional Court consolidated the doctrine in rulings such as File 1630-2004 (08/31/2005), 1061-2010 (08/10/2010) and 2822-2011, declaring that both bonuses have salary nature and that the calculation must be made over the integrated salary. In practice, this is equivalent to multiplying the ordinary salary by 1.1667 (adding 1/12 Bono 14 + 1/12 Aguinaldo). Calculating without that integration is the main cause of labor lawsuits won by workers in Guatemala.