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Terminating an Overseas Employee in Spain

When you are hiring employees overseas you will encounter new rules that govern the employment relationship, and one of the most important of these is termination policies.  In many countries, the rights of employees are favored over the employer when there is a termination, and this is the case in Spain.

If you are new to hiring in Spain, how will you learn all of the rules and prohibitions when it comes to a terminating an employee, including justified reasons and notice periods?  This guide will give you the basics, but as always it may be necessary to engage in country experts to assist you and avoid non-compliance problems.

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How Can an Employment Relationship in Spain be Terminated?

There are a number of ways to terminate an employee in Spain, and each depends on the circumstances:

  • Resignation or termination initiated by the employee
  • Expiration of a fixed term contract
  • Objective or economic dismissal (technical, reorganizing) initiated by the employer, requiring notice
  • Disciplinary dismissal (performance, absences, disobedience), no notice required if valid

Different Types of Contracts in Spanish Labour Law

The type of contract will also affect the termination process and employee rights:

  • Indefinite or open ended contract
  • Definite or fixed term contract
  • Temporary contract
  • Home-work and part time contracts

What is the Required Notice Period for Termination in Spain?

For definite term contracts, no notice is required as the expiry date will be known ahead of time.  Open ended contracts with an objective dismissal will require 15 days’ notice (or payment in lieu), and no notice is required for disciplinary dismissals as long as the correct process is used to inform the employee.

Employee Protection Under Spanish Labour Law

Certain types of employees are protected from dismissal of any type under Spanish law, including:

  • Pregnant women
  • Employees on parental leave
  • Employees working reduced hours due to childcare
  • Employees that previously brought a legal claim against the company

If any of these types of employees are terminated, the dismissal will be found invalid, requiring compensation or reinstatement.

Severance and Redundancy Pay in Spain

There is also a mandatory severance payment due for employees that have been terminated either as an objective dismissal or an expired contract.  No severance is due for a disciplinary dismissal, unless it is deemed unfair by a hearing.

  • Objective dismissal: 20 days pay per year of service (capped at 12 months salary)
  • Definite term contract expires: 12 days pay per year of service
  • Disciplinary dismissal: 33 days per year of service, if the dismissal was ‘unfair’.

ShieldGEO Client Case Example

One of our clients with employees in Spain had a question about the severance pay for different types of contracts.  They were considering renewing a definite term contract and needed to know the consequences if there was a termination, and how that would differ from an indefinite term contract.

The Shield GEO Solution

We informed them that if they used another definite term contract, they would only have to pay 12 days severance (per year of service) upon expiration.  But, if prior to expiration there was an objective dismissal it would be 20 days, same as with an indefinite term.  Likewise, an unfair dismissal would bring 33 days severance for either type, and both of these outcomes are the same regardless of definite vs. indefinite term contracts.

So, the choice of which type of contract to use for the employee rested more on business reasons than potential severance pay.

Do you need more information about Spain?

If these termination rules seem complex, you might have more questions such as:

What are the reasons that justify a disciplinary dismissal?

How are employee complaints about a dismissal handled?

Can the severance pay amount be changed through collective bargaining?

Our in country experts and local partners can help with all of these termination issues, as well as immigration, payroll and tax compliance.  We make international employment simple.

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