See the overview of the main changes introduced by the 2012 Labour Reform here
Written by Josep Conesa
Employment and insolvency lawyer
1. Measures to reduce labour market duality and excessive use of temporary contracts:
| Project-Based Contract (Obra y Servicio) | |
|---|---|
| Before the Reform | After the Reform |
| Duration: indefinite — for as long as the work or service for which the employee was hired requires. |
- Maximum duration of 3 years. - Extendable by 12 months through sector-level collective bargaining. - After this period, the contract automatically becomes permanent. - Applies only to contracts entered into from 18/06/2010 onwards. |
| Compensation upon expiry of a fixed-term contract | |
|---|---|
| Before the Reform | After the Reform |
| 8 days' pay per year of service. |
- Gradual increase from 8 to 12 days' pay per year worked (phased in from now until 2015). - Exception: cover (interinidad) contracts and training contracts. |
| Chaining of Temporary Contracts | |
|---|---|
| Before the Reform | After the Reform |
| Conversion to a permanent contract where an employee has been engaged on temporary contracts for more than 24 months within a 30-month period, under 2 or more contracts (whether directly or through a temporary work agency). |
- Conversion to a permanent contract where an employee has been engaged on 2 or more temporary contracts for the same or a different role within the same company or within a company belonging to the same group. - Also applicable in cases of business subrogation or succession. - Does not apply to training contracts or interim (interinidad) contracts. - Applies to contracts entered into from 18/06/2010 onwards. |
| Collective Dismissals | |
|---|---|
| Before the Reform | After the Reform |
|
- Where economic, technical, organisational or production-related grounds exist and the number of affected employees exceeds the threshold for objective dismissals. - Requires administrative authorisation. - Severance: 20 days' salary per year of service, up to a maximum of 12 monthly payments. - Companies with fewer than 25 employees: FOGASA (the Spanish Wage Guarantee Fund) pays 40% of the severance payment (capped at one year's salary, and the salary used as the basis for calculation may not exceed three times the minimum wage (SMI)). |
- The grounds are defined in slightly more detail, though without providing an objective benchmark — the courts will continue to assess each case on its merits. - Greater flexibility in certain formal procedural aspects. - Severance remains at 20 days per year, up to a maximum of 12 monthly payments; the key change is that the company may no longer be required to bear the full cost of the severance payment. - For open-ended contracts with a minimum duration of one year: FOGASA contributes 8 days' severance for contracts entered into after the reform (this will be taken over by the capitalisation fund from 2012 onwards). |
| Dismissals on objective grounds | |
|---|---|
| Before the Reform | After the Reform |
|
- notice period of 30 days. - Severance: 20 days per year of service, up to a maximum of 12 monthly payments. - Companies with fewer than 25 employees: FOGASA pays 40% of the severance payment (capped at one year's salary, and the salary used as the basis for calculation may not exceed three times the minimum wage (SMI)). |
- The notice period is reduced to 15 days, with no possibility of extension. - Severance remains the same (with the possibility that the company may not bear the full cost). - For open-ended contracts with a minimum duration of one year, FOGASA contributes 8 days' severance for contracts entered into after the reform (this will be taken over by the capitalisation fund once it becomes operational). - If the objective dismissal is declared unfair, severance will be calculated at 45 or 33 days depending on whether the contract is an Employment Promotion Contract (permanent) or not. If declared unfair, the 8-day FOGASA contribution does not apply. |
| Employment Promotion Contract (Permanent) | |
|---|---|
| Before Reform | After Reform |
|
- Severance of 33 days, up to a maximum of 24 monthly payments. Eligible groups: - Young people aged 16 to 30. - Women in sectors with low female participation. - Workers aged 45 and over. - Registered jobseekers for at least 6 months. - People with disabilities. |
- Same severance terms. New eligible groups: - Registered jobseekers for at least 3 months. - Workers who, in the past 2 years, have only held fixed-term contracts. - Workers at the same company (including those on training contracts) with contracts predating the reform that are converted to permanent contracts before 31/12/2010. - Workers at the same company holding fixed-term contract (including training contracts) entered into after the reform with a duration of no more than 6 months, up to 31/12/2011. |
Companies wishing to enter into an Employment Promotion Contract (Permanent) must not have carried out any unfair dismissal or collective dismissal in the preceding 6 months.
Except in two cases:
- Where the terminations took place before 18/06/2010.
- In the case of collective dismissals, where the use of this type of contract had been agreed with employee representatives.
2. Measures on flexibility and working hours reduction:
| Geographical Mobility | |
|---|---|
| Before Reform | After Reform |
| - Consultation period of 15 days (extendable). |
- Consultation period reduced to a fixed 15 days, with no possibility of extension. - Option to replace the consultation period, by agreement between the company and employee representatives, with mediation or arbitration. - Possibility for employees to participate in negotiations even where there is no employee representation in the company. |
| Substantial Modifications to Working Conditions | |
|---|---|
| Before the Reform | After the Reform |
|
- Compensation of 20 days' pay per year of service, up to a maximum of 9 monthly payments. - Consultation period of 15 days. - Grounds were listed but did not constitute an exhaustive list: working hours, schedules, shift systems, work and performance systems, and job functions. |
- Same level of compensation. - Consultation period reduced to a strict, non-extendable 15 days. - A new ground is added (though others beyond those listed may also apply): distribution of working time. - If no agreement is reached, the matter is referred to a mediation procedure, with the possibility of submitting to binding arbitration. |
| Opt-Out from Collective Agreement Wage Terms | |
|---|---|
| Before the Reform | After the Reform |
| - Collective bargaining agreements set the conditions and procedure for disapplying their wage arrangements. |
- Possibility of an agreement between the company and employees (following a consultation period) to temporarily disapply the wage arrangements set out in the collective bargaining agreement. - Duration of the agreement: a maximum of the remaining term of the collective agreement, or 3 years in any case. - In the event of disagreement, binding arbitration is available. |
| Suspension of Contract on objective grounds or force majeure Grounds | |
|---|---|
| Before the Reform | After the Reform |
|
- Social Security contribution rebates of 50%. - Reinstatement of 120 days of unemployment benefit entitlement. |
- Procedure applicable regardless of the number of employees affected. - Rebates increased to 80% where training activities are included for the employee. - Increase in the restoration of unemployment benefit entitlement to 180 days. |
| Working Hours Reduction on objective grounds or force majeure Grounds | |
|---|---|
| Before the Reform | After the Reform |
|
- Social Security contribution rebates of 50%. - Restoration of unemployment benefit entitlement for 120 days. |
- Minimum 10% and maximum 70% reduction in working hours. - Increase in rebates to 80% where training activities for the employee are included. - Increase in the restoration of unemployment benefit entitlement to 180 days. |
3. Measures to promote employment for young people and the unemployed:
| Social Security Contribution Rebates for Permanent Recruitment | |
|---|---|
| Before the Reform | After the Reform |
|
For contracts signed up to 31/12/2011 that result in a net increase in the company's permanent headcount: - Unemployed persons aged 16 to 30 with difficulties finding employment: €800 / 3 years. |
|
In order for the company to benefit from these rebates, it is required to maintain its permanent headcount throughout the 3-year rebate period.
| Social Security Rebates for Training Contracts | |
|---|---|
| Before the Reform | After the Reform |
|
For contracts signed up to 31/12/2011: - Unemployed persons registered at the employment office. - The training contract must result in a net increase in the company's headcount. |
|
| Work Placement Contracts | |
|---|---|
| Before the Reform | After the Reform |
|
- Time limit for entering into the contract: up to 4 years, or 6 for workers with disabilities. - Available for holders of a university degree or a mid- or higher-level vocational training qualification. - Maximum duration of a work placement contract for the same qualification: 2 years. |
- Time limit for entering into the contract: up to 5 years, or 6 for workers with disabilities. - Additional qualification type added: now also available for holders of certificates of professional competence. - Maximum duration of a work placement contract, whether under the same or a different qualification, for the same post: 2 years. |
| Training Contracts | |
|---|---|
| Before the Reform | After the Reform |
|
- No entitlement to unemployment benefit. - Available for holders of a university degree or a mid- or higher-level vocational training qualification. - The company issues a training certificate. - Maximum age: 21 years. - No age limit for workers with disabilities. - Minimum remuneration: minimum wage (SMI). |
- Entitlement to unemployment benefit is recognised. - Qualifications or competencies acquired may be evidenced by a certificate of professional competence, in addition to the company's own training certificate. - Maximum contracting age increased to 25 years for contracts entered into before 31/12/2011. - No age limit for workers with disabilities. - Minimum remuneration in year 1: minimum wage (SMI), in proportion to actual hours worked. - Minimum remuneration in year 2: minimum wage (SMI), without deducting time spent in training. |
4. Measures relating to employment intermediation and the regulation of temporary employment agencies (ETTs):
| Public Employment Services | |
|---|---|
| Before the Reform | After the Reform |
| The number of staff hired to provide guidance to registered jobseekers was increased. | New extension until 31/12/2012 to continue increasing the number of employment advisers. |
| Employment Agencies | |
|---|---|
| Before the Reform | After the Reform |
| Only non-profit agencies permitted. |
- For-profit employment agencies are now authorised. - Services must remain free of charge for workers. - Authorisation from the Employment Service will be required. - Specific regulations are still pending. However, two forms of private agency participation are envisaged: private entities collaborating with the public sector, and private entities operating independently but coordinated by the public sector. |
| Temporary Employment Agencies | |
|---|---|
| Before the Reform | After the Reform |
|
- Temporary agency workers excluded from high-risk sectors. - Same remuneration rights as directly recruited workers. |
- Collective bargaining may enable temporary agency workers to work in certain high-risk sectors. - Full equality of rights with directly recruited workers. - Obligation to inform agency workers of vacancies at the host company. |
Finally, the Labour Reform has left the Capitalisation Fund pending further regulation. Modelled on the Austrian social system, it aims to create a fund — funded through Social Security contributions — that will be made available to the employee in the event of dismissal, a change of company, or ultimately upon retirement.
The creation of this Fund, which is expected to be operational from 1 January 2012, will not result in any increase in employers' Social Security contributions.
In light of these developments, and any further changes that may be introduced during the parliamentary amendment process, our firm remains at your disposal to address any questions you may have and to keep you informed of all developments as they arise.
