Finiquito, meaning "settlement" or "final payment," is a formal document and payment that employers must provide when an employment relationship ends in most Spanish-speaking countries. It serves as both a financial settlement and a legal release between employer and employee.
What a Finiquito Includes
A finiquito typically covers unpaid salary up to the termination date, proportional vacation days not taken, proportional aguinaldo or 13th-month pay, any accrued bonuses, and severance pay if applicable. In Mexico, it also includes a seniority premium (prima de antigüedad) for employees with 15+ years of service.
Country-Specific Differences
In Mexico, the finiquito applies to voluntary resignations while a 'liquidación' covers involuntary terminations with higher severance. In Chile, the finiquito must be ratified before a labor inspector or notary to be legally valid. In Peru, the equivalent process requires payment of all benefits within 48 hours of termination.
EOR Relevance
EOR providers handle finiquito calculations and compliance for each country's specific requirements. This is especially valuable because miscalculated termination payments are one of the most common triggers for labor lawsuits in Latin America.