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Changes to employment conditions, the possibilities offered by the company collective agreement, and salary opt-out arrangements.
Written by Josep Conesa
Employment and insolvency lawyer
In recent years, many companies have found it necessary to restructure their workforces in order to align with their actual business volumes, as consumer spending in Spain has contracted. In response, successive reforms to employment legislation have sought ways to introduce greater flexibility into employment relationships and facilitate agreements that preserve jobs while adapting to companies' evolving needs, for example, by reducing working hours, modifying salary, or implementing pay structures linked to the company's financial performance.
The labour reform introduced last February brought in new measures to ensure that urgent action by companies can take effect in time. The available mechanisms for achieving greater flexibility within a company are as follows:
Modifying the workforce's employment conditions: This involves updating the employee's terms of employment where there are grounds relating to a decline in the company's productivity or competitiveness. Through a substantial modification procedure, it is possible to change conditions relating to working hours, schedules, shift-work arrangements, pay or performance systems, and changes to job functions lasting more than six months. Where such changes are to be applied collectively[1], a consultation period of up to fifteen days opens for negotiating the measures with employee representatives. If that period ends without agreement, the company may implement the measures it deems appropriate, which take effect the week following notification. This mechanism allows a company to propose a measure, negotiate it with employees, and implement it within a maximum of three weeks. Any employee who considers that the substantial modification is detrimental to them will be entitled to terminate their contract with a severance payment of 20 days' salary per year worked, capped at nine months' pay.
The possibility of negotiating a company-level collective agreement: One of the most significant changes introduced last February is the primacy of company-level collective agreements, which now carry new powers allowing them to regulate matters previously reserved for higher-ranking agreements, such as salary, working hours and schedules, with a direct impact on flexibility in employment relations. These agreements are negotiated within the company where they will ultimately apply, and they make it possible to design an arrangement perfectly tailored to the specific needs of each company, covering areas such as remuneration structures, irregular working-hour distributions, and similar matters. It stands to reason that no one understands the business better than the employer and its employees when it comes to reaching the most appropriate and effective agreements.
Opting out of the collective agreement's pay scales: A "wage opt-out" (descuelgue) refers to disapplying the pay scales set out in the collective bargaining agreement in companies where economic, technical, organisational or production-related grounds exist to justify doing so, or where the company is recording current or projected losses, or has experienced a sustained decline in revenue and sales over two consecutive quarters. In practice, this means disapplying agreed pay increases. As with modifications to employment conditions, the opt-out process is preceded by a consultation period, and if no agreement is reached, the matter may be referred to the agreement's Joint Monitoring Committee or submitted to binding arbitration.
There is no one-size-fits-all solution that will work for every company, but there are enough options available to ensure that each business can find the approach it needs. Ultimately, identifying the right solution for your company will depend on sound advice.
