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Employment in Spain

As with other European countries, the Spanish labour market is highly regulated and heavily favours employees, making it notoriously tricky to navigate. There are numerous legislative requirements for employers to comply with, making compliance often costly and time-consuming. However, the global economic downturn has forced Spanish lawmakers to embrace political, social and legal reform in order to enhance flexibility within the Spanish job market.

Key points on employment in Spain

Employment contracts are generally regulated by the provisions of the Workers’ Statute (WS). However, collective bargaining can regulate many aspects of the employment relationship between employer and employee.Workers are represented by labour unions. At company level, workers are represented by directly-elected representatives (workers’ delegates or works committees, which may or may not belong to a union) and by labour union representatives (workplace union branches and union delegates representing a labor union at the company). Collective Labour Agreement are agreements between the workers’ representatives and the employer’s representatives to regulate the terms of employment, which are binding on both parties. Its applicability will depend of the sector as well as the geographical area.

Some key points to be aware of include:

– In principle, employment contracts are presumed to be for an indefinite term. However, there are a limited number of fixed-term employment contracts

– Minimum working conditions are principally set out in the Workers Statute and applicable collective bargaining agreements. Employment contracts are automatically transferred with the business to the new employer. Employees’ rights and obligations are also transferred.

– Termination can be based on objective grounds.

– Dismissals are void if the termination is discriminatory or involves protected employees

For a more detailed explanation of the Spanish labour and employment market, please refer here.

  1. Contracts

    Employment contracts are binding agreements governing the employment relationship between the company and the employee. They may be signed as a permanent contract (general rule) or for a specific term (when a temporary cause exists). In general, an employment contract must include, but is not limited to, the following:

    (i) The identities of the parties;

    (ii) The starting date of the employment relations and, in the case of temporary labour relations, the duration;

    (iii) The company’s domicile or, where applicable, the employer’s address and the workplace at which the employee is to usually provide his or her services.

    (iv) The employee’s professional group, category or the description of the duties;

    (v) The salary and the supplementary payments;

    (vi) The duration and distribution of the working hours;

    (vii) The holidays;

    (viii) The notice period;

    (ix) The applicable collective bargaining agreement.

    It is mandatory for the employers to notify the Public Employment Services of the hiring of employees no later than 10 business days after the employment contracts have been signed.

    Contracts can be made verbally or in writing, unless there are express provisions that require a written contract (for example, temporary contracts, part-time contracts and training contracts). If this formal requirement is not met, the contract is considered to be permanent and full-time, unless evidence is provided to the contrary.

    The Ministry of Employment and Social Security has set up a virtual assistant which helps to suggest and prepares the type of employment contract that may best suits the employer’s requirements.

    There are currently 4 types of contracts provided for under Spanish labour law:

    • Permanent contracts
    • Temporary contracts
    • Training contracts
    • Apprenticeship contracts

    1. Permanent contracts

    Permanent contracts do not have a specified termination date. They may be set out in writing or reached verbally. Either party can require the contract to be formalised in writing at any time.

    Employment contracts may be full-time or part-time.

    Part-time

    A part-time contract is defined as a contract in which a number of hours of work has been agreed with the worker per day, week, month or year. However, their working hours are less than that of a “comparable full-time worker”, that is, a full-time worker at the same company and workplace who performs identical or similar work. Part-time workers generally have the same rights as full-time workers.

    Part-time workers generally cannot work overtime, except to prevent or repair losses and other urgent and extraordinary damages. Supplementary hours (i.e. hours worked over and above what is stated in the contract which are agreed beforehand) are allowed, provided they do not exceed 30% of ordinary working hours (except where they are increased up to 60% in a collective labor agreement). The employer is also allowed to voluntarily offer the employee supplementary hours, which may not exceed 15% of the ordinary hours of the employment contract (30% if agreed in the applicable collective labor agreement). The total ordinary hours and supplementary hours may not exceed the statutory limit for part-time work.

    Distance work

    A distance work contract needs to be formalised in writing (whether in the initial contract or a subsequent agreement). Where the work is predominantly carried out at the worker’s home or a place chosen by the worker, it is considered as distance work.

    2. Temporary contracts

    Temporary or fixed term contracts are contracts made between an employer and employee for a specified time.All temporary contracts must be made in writing and must specify the reason for their temporary nature in sufficient detail. If the grounds for the temporary contract does not truly correspond to one of the legally-established grounds, the contract will be deemed to be made for an indefinite term, unless evidence of its temporary nature is provided.

    If the fixed-term employment contract is made for a term exceeding one year, the party intending to terminate the contract must serve notice at least fifteen days in advance or, as the case may be, give the advance notice established in the applicable collective labour agreement.

    The 3 types of temporary contracts are briefly described below:-

    a. Contract for project work or services

    Grounds: Performance of a specific independent and self-contained project or service within the company’s business. The temporary grounds for the contract must be stated clearly and precisely.

    Term: Dependent on the time taken to perform the project or service, with a maximum of 3 years, which may be extended for a further 12 months under a nationwide industry collective agreement or under an industry collective agreement of a more limited scope

    Termination: Termination of this contract currently entitles the employee to receive severance equal to 11 days’ salary per year worked and from January 2015 it will be 12 days’ salary per year worked. When the maximum periods established have elapsed, workers will acquire the status of indefinite-term employees of the company. When workers have been hired for more than 24 months within a 30-month period, with or without interruption, for the same or different position at the same company or group of companies, under two or more temporary contracts, whether directly or through temporary employment agencies, using the same or different types of fixed-term contract, the contract will be automatically converted into an indefinite-term contract.

    b. Casual contract to cover temporary demand for production

    Grounds: To meet market demand or backlogs or work or orders

    Term: Maximum of 6 months within a 12-month period (may be extended under a Collective Agreement to an 18-month period but may not exceed 3/4 of that period in length, or the maximum term of 12 months)

    Termination: Termination of this contract currently entitles the employee to receive severance equal to 11 days’ salary per year worked and from January 2015 it will be 12 Casual contract to days’ salary per year worked.

    c. Relief contract

    Grounds: To substitute workers entitled to return to their job due to a statutory provision, or the provisions of a Collective Agreement or individual agreement. The contract must state the name of the substituted worker and the grounds for the substitution

    Term: From the beginning of the period until the return of the substituted worker or expiry of the term established for the substitution.

    3. Training / Apprenticeship Contracts

    Training contracts are targeted at young people under 30 who lack the occupational qualifications recognised by the vocational training system or education system required for a work experience contract for the position or occupation for which the contract is made. The contracts run for a minimum of 1 year and maximum of 3 years. The duration may be modified by a collective labor agreement but may not be less than 6 months or more than 3 years.

    Apprenticeship contracts are aimed at hiring university graduates or workers with higher or advanced vocational training qualifications (first degree, master’s degree or doctorate) or officially recognised equivalent qualifications, or workers holding a vocational qualification certificate (certificado de profesionalidad) entitling them to work in their profession. The term of the contract is a minimum of 6 months and maximum of 2 years. This contract must be made in writing. The minimum salary is 60% (during first year) and 75% (during second year) of the fixed salary established in the Collective Agreement for a worker with a similar or identical position.

  2. Probation Periods

    Where a probation period is agreed (provided that the worker has not performed the same functions before at the company under any type of employment contract, in which case the trial period would be null and void), it must be put in writing.

    The time limits for trial periods may be established in the respective collective bargaining agreement. However, as a general rule and in the absence of any provision in the collective labour agreement, the probationary periods cannot exceed:

    • Six months for college and junior college graduate specialists.
    • Two months for all other employees.
    • At companies with fewer than twenty-five employees, the trial period for employees who are not college or junior college graduate specialists cannot exceed three months.
    • One month in the case of temporary fixed-term employment contracts which are less than six months. Moreover, training contracts, indefinite-term employment contract in support of entrepreneurs and special employment contracts (domestic workers, senior managers, among others) have their own specific trial periods.

    During the trial period, the employer or the worker can freely terminate the contract without having to allege or prove any cause, without prior notice and with no right to any indemnity for either the worker or the employer.

  3. Termination Procedures

    An employment contract may be terminated for a number of reasons:-

    • Mutual agreement by and between the parties
    • Expiry of the agreed term of the completion of the job or service under contract.
    • The employee’s resignation.
    • Disciplinary dismissal of the employee. If the dismissal is declared unfair, the employee would be entitled to the following severance pay: thirty-three days’ salary per year of services rendered, with a monthly pro rata for the periods of time shorter than one year, up to a maximum of twenty-four months of salary.
    • Collective dismissal on economic, technical, organisational or productive grounds. In the event that the dismissal is declared unfair, the employee would be entitled to the severance pay stated for disciplinary dismissal declared unfair. When the dismissal is declared fair, the employees would be entitled to a severance pay equal to 20 days’ salary per year of service up to a maximum of 12 months of salary.
    • Individual dismissal due to objective causes according to law (same causes as collective dismissal above). In the event that the dismissal is declared unfair, the employee would be entitled to the severance pay stated for disciplinary dismissal declared unfair. When the dismissal is declared fair, the employee would be entitled to a severance pay equal to 20 days’ salary per year of service up to a maximum of 12 months of salary
    • Death, major disability or full or absolute permanent disability of the work, with the exclusions provided in law.
    • Unilateral termination by the employee based on breach of contract by the employer. In the event that the dismissal is declared unfair, the employer may compensate the employee with the severance pay stated for disciplinary dismissal declared unfair.

    The specific legal obligations upon termination depend on the type of termination (e.g., retirement, individual dismissal, collective dismissal, etc.) In any case, the employee’s salary must be paid until the termination date, including accrued and untaken holidays, earned bonuses and commissions, etc. Terminations by the employer without cause would result in a severance payment of 45 days of salary per year of employment up to a limit of 42 months’ salary. In some cases (i.e. discrimination) the termination could be considered null with the obligation of re-employment plus damages.

    As can be seen above, in the event of termination by the employer, there are three main grounds for dismissal of an employee: collective layoff, objective grounds or disciplinary action.

    1. Collective dismissal

    Collective dismissals may be made on economic, technical, organisational or production-related grounds, whenever these affect, in a 90-day period, at least:

    • The entire payroll, if more than 5 workers are affected and the activity of the company ceases entirely;
    • 10 workers at companies with less than 100 employees;
    • 10% of the employees at companies with between 100 and 300 workers;
    • More than 30 workers, at companies with 300 or more employees.

    Collective layoffs must follow the legal procedure established under Article 51 of the Workers’ Statute.

    Firstly, there must be a period of negotiation with the workers’ representatives of no more than 30 calendar days, or 15 days at companies with less than fifty employees. The labour authorities have to be informed of the outcome of the negotiations and final decision.

    Next, the employer must give 7 or 15 days’ prior notice of its intention to start a collective layoff procedure, depending if the communication is issued to the workers’ representatives or the own employees (in case there are no workers’ representatives). After notifying the workers’ representatives, the employer would individually notify the workers concerned of the layoffs. At least 30 days must elapse between the date of commencement of the consultation period and the effective date of dismissal.

    If the collective layoff affects more than 50 workers (except at companies subject to insolvency proceedings), the company must offer the workers concerned an outplacement plan through an authorised outplacement company. The plan must be at least six months’ in duration, and must include professional guidance and training measures, personalised assistance and job search.

    The statutory severance pay consists of 20 days’ salary per year worked, up to a maximum of 12 months’ salary, or more if so agreed. In general (except at companies subject to insolvency proceedings), when workers aged 55 or over are affected, special agreements must be signed with the social security authorities. In some cases, if workers affected in the collective layoff are aged 50 or over, an economic contribution must also be made to the Public Treasury.

    2. Objective grounds

    Examples by which an employee may be dismissed under objective grounds include:

    • Incompetence
    • Inability of the worker to adapt to changes made to his job. Before dismissing the worker, employers must offer the worker a training course to facilitate adaptation to such changes. Workers cannot be dismissed until a minimum period of two months has elapsed since the changes were made or the training was completed.
    • Objectively-evidenced need to abolish job positions due to economic, technical, organisational or production-related reasons (see definition of the reasons under collective layoff).
    • Intermittent absences from work, even where justified,  totalling 20% of the working hours in 2 consecutive months, provided that the total absences in the preceding 12 months accounted for 5% of working hours or 25% in any 4 months out of a 12-month period.

    The employer must serve at least 15 days’ advance notice in writing on the worker (or pay the corresponding salary). The employee is entitled to severance pay of 20 days’ salary per year worked, up to a maximum of 12 months’ salary. This must be made available to the worker at the time the written notice of dismissal is served.

    3. Disciplinary action

    Employees can be terminated due to serious disciplinary breaches, such as:

    • Repeated and unjustified absenteeism
    • Insubordination or disobedience
    • Physical or verbal abuse towards the employer
    • Breach of contractual good faith or abuse of trust.
    • Wilful reduction in job performance.
    • Habitual drug or alcohol abuse which adversely affects job performance.
    • Harassment by reason of race or ethnic origin, religion or beliefs, disability, age or sexual orientation, and sexual or gender harassment towards the employer or persons working at the company.

    The employer must serve written notice of disciplinary dismissal, stating the grounds and the effective date of dismissal. If a workers’ representative or labour union delegate is dismissed, a disciplinary procedure in which all parties are heard (expediente contradictorio) must be followed. If the worker is a labor union member, the union delegates should be granted a hearing. These safeguards may be increased by collective agreement.

    If these formalities are not met, a further dismissal may be made in a period of twenty days by paying the employee the salary accrued in the meantime, with effect as of the date of the new notice.

    Senior management contracts

    Special rules apply to the termination of certain types of senior management employees,A senior manager is an employee who has broad management authority in relation to the company’s general objectives and exercises that authority independently and with full responsibility, reporting only to the company’s supreme governing and managing body.

    Senior managers’ contracts can be terminated without cause by serving notice at least 3 months in advance. In such a case, the senior manager is entitled to severance pay of seven days’ pay per year worked, up to a maximum of six months’ pay, unless different terms of severance have been agreed on. Alternatively, a senior manager can be dismissed on any of the grounds stipulated in general labour legislation (objective grounds, disciplinary action). If the dismissal is held to be unjustified, the senior manager is entitled to 20 days’ pay in cash per year worked, up to a maximum of 12 months’ pay, unless different terms of severance have been agreed on. In addition, the law establishes certain grounds on which the senior manager can terminate his or her contract and receive the agreed-upon severance pay and, failing that, the severance pay established for termination due to employer withdrawal.

    Senior managers may freely withdraw from their contracts by serving at least three months’ advance notice. It should be noted that the statutory severance for senior managers is currently lower than that for ordinary employees. However, in practice, senior management contracts usually provide for severance payments that are higher than the statutory minimum.

  4. Statutory Leave

    Working hours

    The maximum working hours are those agreed in collective labor agreements or individual employment contracts.The legal work week is 40 hours, although many companies have reduced working hours to 37 or 38. The Workers Statute maintains a 40-hour legal work week but permits total hours to be distributed irregularly over the year if such an arrangement is part of a collective bargaining agreement.

    Overtime is time worked in excess of the maximum ordinary working hours. Overtime regulations are dictated by national law and collective bargaining agreements. Paid overtime may not exceed 80 hours per year. Overtime can be taken as time in lieu within four months of the date on which the overtime was worked. It is generally voluntary.

    Annual leave 

    Each employee has the right to a minimum of one and a half days off per week, which may be accumulated by periods of up to 14 days. Workers are entitled to a minimum vacation period of 30 days, which cannot be paid in lieu. Employees are entitled to a minimum of thirty (30) days of paid vacation per year, which may differ by contract or collective agreement. In addition, there are fourteen (14) public holidays per year, which may differ slightly by region.

    Sick leave 

    Employees who have fallen ill or have suffered an accident can have their employment contract suspended during for up to 18 months. The employer normally pays the worker this temporary sick pay, and is then reimbursed by the Social Security department.

    Maternity leave 

    Female employees who are pregnant are entitled to 16 weeks paid maternity leave. The mother must take six (6) of these full-time weeks right after birth. The remaining ten (10) can be exchanged for twenty (20) weeks of part time work if the employee reaches an agreement with the employer.

    Other leave 

    Workers may be entitled to a reduction in their working hours in certain cases, for example: to directly care for children under 12 or family members who cannot take care of themselves, during the hospitalization and continuing treatment of a child in their care with cancer or any other serious illness that entails a long hospital stay and who requires direct, continuing and full-time care, until the child reaches 18 years.

    Workers are also entitled to paid leave in certain circumstances, such as marriage, performance of union duties, performance of unavoidable public or personal duties, breastfeeding, birth of children, relocation of main residence, serious illness or accident, hospitalisation or death of relatives up to the second degree of kinship, etc.

  5. Pensions and Benefits

    Generally, all employers, their employees, self-employed workers, members of manufacturing cooperatives, domestic personnel, military personnel and civil servants who reside and/or perform their duties in Spain are required to be registered with, and pay contributions to, the Spanish social security system. Spain has a number of bilateral social security agreements in force, provide relief from double social security taxation and for assured benefit coverage.

    Workers posted to Spain under the relevant social security agreements or regulations who continue to be subject to the legislation of their country of origin will not be registered with the Spanish social security system. On the contrary, when a worker is employed in Spain to carry out services in this country on a permanent basis (i.e. has received a residence and work permit), he or she must register with the Spanish Social Security System, irrespective of the worker’s nationality.

    Social security contributions are partly paid by both the employer and employee. Employees are classified under a number of professional and job categories for the purposes of determining their social security contributions. Each category has a maximum and minimum contribution base, which are generally reviewed on a yearly basis. Employees whose total compensation exceeds the maximum base, or does not reach the minimum base, must bring their contributions into line with the contribution base for their respective category.

    The rate of social insurance contributions is generally 6.35% for employees, and the rate for employer contributions is generally 30.15% of salary.The maximum monthly contribution base for 2015 is € 3,606 and the minimum is € 756.6 per month. Therefore, although an employee receives an amount that is higher than € 3,606, the contribution should not be higher than for the said amount.

    Please refer here for a full list of the maximum and minimum contribution bases for all categories.

    The employees’ portion of contributions are deducted at source from their remuneration. Employers must notify the Social Security General Treasury in each settlement period of the amount of all the remuneration items paid to their employees, irrespective of whether or not they are included in the social security contribution base and even if single bases are applicable.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Spain. For companies which intend to employ their staff directly through their incorporated Spanish entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Spain.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Spain.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Spain
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Spain
– the company needs help with tax, employment, immigration and payroll compliance in Spain

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