Employing staff in Spain

Employee rights and employer's obligations explained

Spain’s employment law and practices have been under the spotlight recently because they have been blamed as partly responsible for the weak state of the economy and high unemployment rate (20%) . The government has been looking to reform the system for the best part of a year so far without agreement from trade unions or employers. See this BBC article Spain to move ahead with labour market reform.

But what is the current system? This article looks at what employers need to know before taking on employees in Spain.

Employment law basics


> All employees must be given employment contracts on or before their first day of employment

> Generally the employee must be 18 years of age before they can be employed although 16 and 17 year olds living independently from their parents can work with their consent

> Employment contracts can have test or trial periods (periodo de prueba) built in but the length of these is limited by law or collective agreements (see below) often to 2 months.

> Minimum salary levels and things like disciplinary procedures and holiday entitlement are set by binding collective agreements called “Convenios Colectivos” which operate in different regions and sectors. This website gives information on each convenio in each province:

http://convenios.juridicas.com/convenios-sectores.php

> Contracts given to staff can be either tiempo completo (full time, often 40 hours) or tiempo parcial (part time, at a number of hours agreed with the employee with pay and benefits scaled down accordingly).

> A further distinction is made between permanent contracts (indefinitivo) and temporary contracts (temporal). There are many types of temporary contracts including those for fixed periods, pregnancy leave substitution and those which last as long as a particular job or process.

> The government offers hiring bonuses for employers taking on permanent staff, which vary according to the type of employment the government is trying to encourage. For example higher bonuses are given for the employment of unemployed women, women in the two years after giving birth, young people (below 30), domestic violence victims, disabled etc The bonuses can be up to €1,500 per year for four years, more and for longer for disabled employees. See this leaflet:

https://www.redtrabaja.es/es/portaltrabaja/resources/pdf/contratos/folleto_campana.pdf

> Redundancy pay is payable once an employee has served a year and can be up to 3 ½ year’s salary (it goes up 45 days a year served, although this can be less on certain contracts).

> Expect to pay approximately 40% of the basic wage in non-wage costs, mainly being employer’s social security contributions. However there are a host of deductions available to employers which depend on the type of contract they are offering, status of the employee, age and sex being important but not the only factors.

> The employer has to deduct employee’s social security contributions (approximately 6% of pay) and income tax, similar to UK PAYE, from the monthly wage or “nomina”. An analysis of the employee’s salary and deductions for the month must be presented to them and a signed copy kept by the employer.

> Disputes with employers are supposed to be settled initially by arbitration. If an employee feels wrongly treated or not given his or her contractual rights, they can take a claim to the Instituto de MediaciĂłn, Arbitraje y ConciliaciĂłn but if agreement cannot be reached then they can lodge a claim with the Labour Court, Magistratura de Trabajo.

> Holiday rights are set by convenio and 23 days a year is common.

> The employee can chose to have pay spread over 14 instead of 12 times a year with additional pay days in July and December.

> Maternity leave is 4 months and there is other time off built in for marriage, deaths, births and moving house. Sick pay is usually paid by the social security system.

Labour market reforms: the proposals (not yet agreed)

Spain has been pressured by the EU and international institutions to reform its labour market which has been described as “dysfunctional”. The government has said it intends to press ahead with introduction of the reforms even without agreement from unions or employers (the unions are threatening a general strike). In fact all parties are agreed on many of the elements of the plan:

Reform of the system of subsidies for creating new permanent jobs (bonificacciones al empleo) mentioned above. These are thought to be too widely distributed and will be targeted more specifically on people who struggle to get into the labour market.

More incentives and proposals to fight youth unemployment (44% by some estimates)

Adopting the system, common in Germany, where when a company is in trouble they can cut back on the hours being worked by employees as an alternative to laying them off completely

More labour inspections to uncover employers using staff without contracts or the wrong type

The controversy surrounds two related elements of the plan – to reduce the amount of statutory redundancy pay from 45 days pay per year worked to 33 days (20 if the company is in financial difficulty). This would only apply to new contracts. In exchange employers would be limited in their ability to offer only temporary contracts and would lose some of the exemptions from having to pay full redundancy packages on some contracts.

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