Determining the basis for calculating severance pay for wrongful dismissal has been one of the most debated aspects of Ecuadorian labor law. The lack of uniform criteria—particularly regarding applicable remuneration—generated uncertainty in both judicial practice and business management.
In this context, the National Court of Justice, through Resolution No. 02-2025, has established a binding jurisprudential criterion that redefines this essential element of the severance pay calculation, providing greater clarity and legal certainty to its determination.
The central tenet of this precedent lies in the adoption of the “last highest remuneration” criterion, understood as the most favorable remuneration actually received by the employee, which may correspond to either the month prior to dismissal or the month in which the employment relationship was terminated. This criterion is based on a systematic interpretation of Article 188 of the Labor Code, in conjunction with Article 95 of the same legal framework, which defines the concept of remuneration and its components.
In this regard, the Court not only establishes the applicable remuneration timeframe but also clarifies its scope by incorporating all items of a regular and customary nature received by the employee. These include, among others, commissions, overtime and supplementary hours, profit sharing, the individual contribution to the Ecuadorian Social Security Institute when assumed by the employer, as well as any other compensation that, according to the nature of the activity, constitutes regular income.
This approach avoids restrictive interpretations of salary and allows for a more technical determination aligned with the economic reality of the employment relationship.
Additionally, the precedent introduces a relevant element from an operational perspective: the possibility of considering remuneration that does not correspond to a full month, provided it is more favorable. Consequently, in cases where the employee received higher income in the month of dismissal—even if proportional—this higher income may be used as the basis for calculation.
Furthermore, in scenarios involving variable remuneration, the regulations allow the use of averages, particularly in cases of commissions or piece-rate income, which reinforces the need for a case-by-case and properly documented analysis.
From a practical perspective, this criterion implies the obligation to conduct a comparative analysis of the various remunerations received in the periods immediately preceding the dismissal, in order to identify the most favorable one. It also requires a proper breakdown of the items comprising the remuneration, excluding those that, according to current regulations, are not considered salary.
Consequently, Resolution No. 02-2025 not only unifies the applicable criterion but also establishes clear parameters for determining the calculation basis for severance pay for wrongful dismissal. Its application has a direct impact on the preparation of settlements and final payments, as well as on the structuring of legal strategies in both administrative and judicial proceedings.
Thus, the jurisprudential criterion is consolidated as a technical element that guides the correct determination of the compensation amount within the current legal framework.
- Additionally, the following complementary aspects must be considered:
In labor proceedings, trial judges are obligated to calculate interest and precisely determine the amounts to be paid, in accordance with Article 371 of the COGEP (General Organic Code of Procedure) and Resolution No. 08-2016 of the National Court of Justice, which mandates its inclusion even if not expressly requested by the plaintiff. - When the claim includes back wages accrued during the term of the employment relationship, regulations and jurisprudence provide for the application of surcharges, in accordance with Article 94 of the Labor Code—which stipulates payment equivalent to three times the unpaid wages for the last quarter—and Resolution No. 14-2015 of the National Court of Justice, which establishes the obligation to order such payment in the judgment.
