Employment Law Updates for 2003

1. REGULATION OF dismissal:

Law 45/2002 of 12 December repealed the so-called 'decretazo' of May 2002 (RDL 5/2002), amending, yet again, the rules governing dismissal.

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· The current rules have the following key features: an employee, from the moment they receive the dismissal letter, and provided they meet all other requirements, is entitled to claim unemployment benefit without needing to challenge the dismissal, submitting the dismissal letter is sufficient. Accordingly, where both parties reach an agreement, there is no longer any need to attend the individual conciliation service ('Servei de Conciliacions Individuals') as was previously required; it is enough to record the agreement in a private document, and the employee can then access unemployment benefit directly.

The employee is entitled to receive procedural wages (salarios de tramitación), that is, wages accruing from the date of dismissal through to conciliation or notification of the judicial ruling, except where the company has acknowledged the unfairness of the dismissal in the dismissal letter itself and has deposited the full severance amount with the employment tribunal.

In other words, if the employer deposits the severance amount with the court within 48 hours of the dismissal, no procedural salary is payable. If the deposit is made after 48 hours but before the conciliation hearing takes place, the procedural wages payable will cover the period from the date of dismissal to the date of deposit. If no deposit is made, the procedural wages payable will run from the date the dismissal letter was delivered through to conciliation or notification of the judicial ruling.

This makes the precise drafting of the dismissal letter particularly important.

2. FRAUDULENT USE OF FIXED-TERM CONTRACTS:
Where the Catalan Regional Employment Office ('Oficina de Treball de la Generalitat') determines that the successive fixed-term contracts entered into with an employee by the same company constitute a fraudulent abuse of law, it may bring a judicial claim against the company on its own initiative.

If the court upholds the ruling, the employee must be reinstated as a permanent employee of the company, which will also be required to repay any unemployment benefits received by the employee and to pay, together with the corresponding Social Security contributions, all wages the employee should have received from the date of the last termination through to the date of reinstatement.

3. SOCIAL SECURITY CONTRIBUTIONS ON HOLIDAY ENTITLEMENT:
Any outstanding holiday entitlement remaining at the time of termination of the employment contract must be paid out by the company to the employee, and corresponding contributions must be made to Social Security.

Such contributions shall be made by means of a supplementary settlement covering the number of days of outstanding holiday, even where those days extend into the following calendar month or the employee commences a new employment relationship with another company.

4. EMPLOYMENT PROMOTION FOR 2003:
The same beneficiaries as in the previous year shall be entitled to bonuses and reductions in Social Security contributions, provided that the employment contract is for an indefinite period.

The main groups eligible for bonuses are:
    1.- Unemployed women aged between sixteen and forty-five.
    2.- Unemployed women hired to work in occupations or professions with a low rate of female employment.
    3.- Unemployed persons continuously registered at the employment office for six months or more.
    4.- Unemployed persons aged over forty-five and up to fifty-five.
    5.- Unemployed persons aged over fifty-five and up to sixty-five.
    6.- Unemployed persons receiving unemployment benefit benefits or subsidies with one year or more of entitlement remaining at the time of hiring.
    7.- Unemployed persons receiving the subsidy for unemployment under the Special Agricultural Scheme of Social Security.
    8.- Unemployed persons admitted to the programme providing the specific support known as the 'Active Integration Income' (Renta Activa de Inserción).
Unemployed women registered at the employment office who are hired within twenty-four months of the date of childbirth.

Bonuses: Initial permanent contracts, including permanent seasonal contracts, whether full-time or part-time, entered into during 2003 shall entitle the employer, from the date of hiring, to the bonuses on the employer's Social Security contributions for common contingencies as set out in the table reproduced at the end of this article.

5. PERSONAL INCOME TAX (IRPF):
Royal Decree 27/2003 of 10 January introduced several amendments to the Personal Income Tax (IRPF) regulations.

In general, tax rates have decreased compared to the previous year, as larger deductions are now available for spouses and dependent children, particularly those under 3 years of age.

The withholding rate for self-employed professionals has been reduced to 15%, down from the previous 18%. Professionals who had no activity in the year prior to commencing their current activity will be subject to a rate of 7%, applicable during that year and the two following years.

In addition, the maternity tax deduction may be received in advance by all mothers who work full-time for at least 15 days per month, or who work part-time for the entire month.

The amount payable is 100 euros per child, and claims must be processed through the Spanish Tax Authority.

6. WORKPLACE ACCIDENT REPORTS:
From 1 January 2003, work-related accident reports may be submitted electronically.

For this purpose, the Delt@ programme (Electronic Work Accident Reporting System) has been created, accessible at http://www.delta.mtas.es and on the websites of nearly all Occupational Accident and Occupational Disease Mutual Funds (Mutuas de Accidentes de Trabajo y Enfermedades Profesionales).

Throughout 2003, submissions may be made either in paper form, as previously, or via the electronic system. From 1 January 2004, all reports must be submitted exclusively by electronic means.

Should you face any potential dismissal, or require clarification on any of these matters, please do not hesitate to contact our firm. We would be delighted to assist you.

Social Security Contribution Rebates: