Severance Pay in Greece in 2026: An Employer's Guide

There are numerous employment regulations in Greece for businesses located there or planning to start their operations there. Before scaling your business, you must become familiar with labor and business laws, such as those regulating severance pay in Greece.

With continued economic disruptions and a significant unemployment rate (around 10% on average), a large portion of the country’s highly skilled population is eligible for work with global firms. As a result, firms typically find employment costs to be relatively low.

However, these facts do not prepare employers for the hidden costs and risks of hiring in Greece, including the cost of severance pay. To help, this article will explore the employer responsibilities that have to be met in Greece and the regulations surrounding justified termination.

How is Severance Pay Calculated in Greece?

The amount of severance pay for terminated employees in an open-ended contract is determined by years of service. However, dismissing employees for misbehavior or similar personal matters does not automatically result in severance pay.

When terminating an open-ended employment contract, severance is calculated as follows:

Severance pay is calculated based on the previous month’s regular compensation as a full-time employee.

Employees terminated during their first year working for the company are not eligible for severance pay. 

Additional severance compensation is paid for private sector workers with open-ended contracts that go beyond the lengths of time above. These are as follows:

Legal Framework Governing Severance Pay and Termination in Greece

Severance pay and dismissal procedures in Greece are regulated primarily by the Termination of Employment Law, Law 4093/2012, and subsequent labor reforms introducing justified dismissal requirements.

These rules aim to balance employer flexibility with employee income protection, particularly in a labor market characterized by economic volatility and high unemployment levels.

Greek termination law distinguishes between notice pay, statutory severance compensation, and compensation for unlawful dismissal. Employers must therefore evaluate termination decisions carefully to ensure compliance with both procedural and substantive requirements. Failure to demonstrate a legitimate dismissal reason may result in compensation liability or reinstatement risk.

Severance Pay vs Notice Pay in Greece

A key compliance consideration for employers is distinguishing severance compensation from notice salary. While both may arise at termination, they serve different legal purposes and may apply simultaneously.

This distinction is important because termination costs often exceed initial expectations when notice and severance obligations overlap.

Collective Redundancies and Employer Consultation Obligations

Collective redundancies in Greece trigger additional compliance requirements beyond individual dismissal procedures. Employers must consult employee representatives, notify labor authorities, and provide detailed justification for workforce reductions.

Consultation processes typically include information sharing regarding economic circumstances, selection criteria, and potential alternatives to dismissal. Social measures such as voluntary exit programs, redeployment support, or retraining initiatives may also be negotiated. Failure to comply with consultation obligations may invalidate termination decisions or increase compensation exposure.

Unfair Dismissal and Compensation Risk in Greece

Greek employment law requires employers to demonstrate legitimate termination grounds. If dismissal lacks a valid justification, employees may challenge termination through judicial proceedings. Courts may award compensation based on service length, salary level, and dismissal circumstances, and in some cases, reinstatement may be ordered.

This framework makes documentation critical. Employers must maintain evidence supporting dismissal decisions, including performance reviews, warnings, or business restructuring rationale. Settlement agreements are frequently used to mitigate litigation risk and ensure predictable termination outcomes.

Is Severance Pay Taxable in Greece?

Individuals must pay income tax on their total net earnings in Greece and overseas. Net income earned in Greece is taxed, regardless of the individual’s residence location. Income earned overseas is taxed only if the person is a Greek resident.

Greek taxes on severance payments are as follows:

The employer is in charge of a worker’s solidarity taxation, tax on income, and contribution to social security (IKA). Every month, these tax payments must be completed by the end of the month. The fine for a late submission is 10% of the total amount payable.

Employee Termination in Greece – Labor Laws        

Employers must provide a legitimate reason for terminating an employee as of May 2019. The termination is deemed invalid if there is no sufficient cause given. Furthermore, the employee has the right to challenge and even overturn a dismissal. In these cases, the employer bears the burden of proof.

Notice Periods in Greece

Employers who intend to terminate an employee must provide a notice period if the employee is on an open-ended contract.

Fixed-term employment can be dismissed at any time and without notice if a valid reason is presented. This can be for reasons such as a proven breach of their labor contract, an employee’s consistent lack of performance, etc. The worker has no entitlement to severance pay in these situations.

When terminating an open-ended contract employee, employers must comply with the following required notice periods:

Additional Considerations for Terminating Open-Ended Contracts in Greece

• Employers in Greece are not permitted to use fixed-term agreements for permanent employment. 
• An open-ended contract with more than 12 months can be dismissed only after written notice from the employer, according to Law 4093/2012.
• Based on the duration of service with the employer, a notice duration ranging from one to four months is specified.

When an employer discontinues an open-ended employment contract, severance pay is calculated using the same table shown above.

Step-by-Step Guide to Lawful Termination and Severance Pay in Greece

Termination in Greece must be handled as a structured compliance process rather than a single administrative action. Because Greek employment law requires justified dismissal and imposes statutory severance obligations for open-ended contracts, employers must carefully manage both procedural and financial aspects of termination to avoid litigation risk.

1. The first step involves confirming the legal grounds for dismissal. Employers must clearly identify whether termination is based on redundancy, performance issues, misconduct, or business restructuring. Since justified dismissal requirements place the burden of proof on employers, documentation supporting the decision should be prepared from the outset, including performance reviews, warnings, or restructuring plans.
2. Once termination grounds are confirmed, employers must determine the employee’s contract type and protection status. This includes verifying whether the employee holds an open-ended contract, assessing eligibility for severance pay, and checking whether additional protections apply, such as collective redundancy rules or protected employee categories. Accurate classification at this stage is critical for calculating termination obligations.
3. The next stage is calculating the statutory notice period. Notice periods depend on employee seniority and must be provided in writing when terminating open-ended contracts. Employers must also decide whether notice will be worked or replaced with payment in lieu. The decision should consider operational continuity, employee morale, and litigation exposure.
4. Following notice calculation, employers must determine severance entitlement and calculate compensation. Severance pay is based on the employee’s most recent regular salary and length of service, with progressive statutory thresholds applying. Employers must also include accrued vacation pay, bonuses, and contractual benefits where applicable. Because notice and severance may overlap, termination cost planning should address both elements simultaneously.
5. Where collective redundancies are involved, employers must conduct consultation procedures with employee representatives and notify relevant authorities. Consultation typically includes providing justification for workforce reductions, discussing selection criteria, and exploring alternatives to dismissal. Failure to comply with consultation requirements may invalidate termination decisions or increase compensation exposure.
6. Employers must then issue formal termination documentation. This includes written notice of dismissal, severance calculation details, final payroll statements, and documentation required for unemployment benefit eligibility. Accurate and timely documentation supports employee transition and reduces administrative risk.
7. Settlement agreements may be considered where termination risk is elevated. Negotiated agreements can provide compensation beyond statutory minimums in exchange for waiver of claims, confidentiality provisions, or garden leave arrangements. Settlement agreements are particularly useful in senior or dispute-sensitive termination scenarios.
8. Finally, employers should assess whether legal review is necessary. Legal consultation is recommended for collective redundancies, executive dismissals, performance-related terminations, and cases involving potential unfair dismissal claims. Proactive legal oversight helps ensure compliance with Greek employment law and reduces the likelihood of litigation.

A structured termination process enables employers to balance Greece’s employee protection framework with operational flexibility. By following a step-by-step approach, organizations can minimize legal exposure, manage severance costs predictably, and ensure a compliant workforce restructuring.

Common Employer Mistakes When Managing Severance Pay in Greece

International employers often encounter compliance challenges due to Greece’s procedural requirements and evolving labor framework. Common mistakes include misclassifying termination grounds, failing to provide written notice, underestimating severance obligations, or overlooking consultation requirements in redundancy situations.

Another frequent risk arises from improper use of fixed-term contracts for permanent roles, which may lead to reclassification and increased termination liability. Because severance calculations depend heavily on seniority and employment classification, accurate contract structuring is essential from the outset of the employment relationship.

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Speak with an advisor at INS Global to proceed with your expansion strategy, recruitment, and HR.