I.- INTRODUCTION
The labour market reform passed by means of Royal Decree-law 3/2012 of February launches a packet of measures designed to make the labour market in Spain more flexible and promote employment. On the other hand, and to a certain extent, Spanish Labour Legislation is coming into line with the predominant features of that of other countries of the European Union. In the following, we shall resume some of the measures that shall have a major impact upon Spanish companies, especially SME’s.
II.- REFORMS.
A) Apprenticeship contracts:
• Applicable to employees aged over 16 and under 25 years old.
• Minimum duration of one year and a maximum of three years.
• Compatible with training activities of no less than 25% of effective employment during the first year and no less than 15% in the second and third years.
• Salary shall be proportional to the time dedicated to effective employment, in accordance with the applicable collective bargaining agreement.
• Once the training period has ended, the employee cannot be contracted by the same company, although it is possible for the employee to be contracted by other companies in other sectors under the same type of labour contract.
• Rebates in company Social Security contributions are established for new apprenticeship contracts, of up to 100% during the initial period and consequent extensions.
• The transformation of apprenticeship contracts into permanent contracts shall give rise to a reduction in Social Security contributions of 1.500 Euro per year for a term of three years. In the case of women it shall be 1.800 Euro.
B) Promotion of permanent contracts.
1) Support contract for businesses: Companies with less than 50 employees which enter into full time permanent contracts, shall benefit from the following tax incentives:
a) A tax deduction of 3.000 Euro if the employee is under 30 years old.
b) Additionally, if the employee were in a situation of unemployment, the company would be entitled to a tax deduction equivalent to 50% of the employee’s unemployment benefit still pending receipt at the time of signing the employment contract, with a limit of 12 monthly payments, all in accordance with determined regulations.
c) In the case of employees of between 16 and 30 years old, the company shall be entitled to a rebate in Social Security contributions for a term of 3 years, amounting to 1.000 Euro for the first year, 1.100 Euro for the second year and 1.200 Euros for the third year. In the case of the unemployed over 45 years old, the rebate would amount to 1.300 Euro for a period of 3 years. In the case of women the rebate would be 1.500 Euro per year.
The above incentives require that the employee remains in employment for at least 3 years, except in cases of disciplinary or legitimate dismissal.
2) Part time contracts.
Part time employees may do overtime provided that the sum total of the overtime combined with normal working hours and complementary hours does not exceed the legal limit for part time work.
3) Rebates for the transformation of internship, relief and substitution contracts.
o In companies with less than 50 employees, the abovementioned contracts transformed into permanent contracts shall be subject to a rebate in Social Security contributions of 500 Euro for three years, increased to 700 Euro in the case of women.
C) Measures to allow employment flexibility in companies.
1) Professional classification. By means of agreement with employees, a classification system for professional groups shall be established allowing wider definitions than those currently existing and facilitating functional versatility.
2) Geographical mobility: objective conditions shall be established for the selection of employees subject to mobility.
3) Contractual modifications: the employer may modify inter alia, the functions of the employee, working hours and the performance system under determined objective conditions (economic, technical and organisational circumstances, including a fall in sales during two consecutive quarters, current losses or a prevision of losses). In the case of substantial modifications to the contract, such as the remuneration or salary system, the employee shall be entitled to terminate the contract and receive an indemnification of 20 days per year of service up to a maximum of nine months’ salary, or challenge the measure before the courts. This last option is without prejudice to the immediate enforceability of the measure.
4) In cases of contract suspension or a reduction in working hours for technical, organisational or production causes or causes derived from acts of God, the requirement for obtaining a prior administrative authorisation is eliminated. The company shall benefit from a rebate of up to 100% in Social Security contributions of employees whose contract has been suspended, for a maximum of 240 days per year, and conditioned to the stability of employment of at least 1 year.
5) Collective negotiation:
o Company bargaining agreements shall have priority, which are negotiable over and above the geographical or sector collective bargaining agreements.
o For companies in difficulties, the opting out of the collective bargaining agreement applicable to the industry shall be facilitated; in the case of disagreement with the workers, arbitration shall be resorted to.
o The automatic indefinite renewal of collective bargaining agreements, in the case of disagreement between parties, is eliminated, which should thus facilitate the negotiation and securing of agreements at the end of the validity of those agreements in force.
D) Measures to favour efficiency in the labour market and reduce employment duality.
1) Termination of the employment relationship.
o The causes for objective dismissal are better defined, on an individual basis (absenteeism, lack of adaptation to technical modifications) as well as on a collective basis (economic, technical and organisational circumstances, including a fall in sales during three consecutive quarters, current losses or a prevision of losses). In such cases, the indemnification shall be 20 days per year of service.
o The previously required prior authorisation from the administration for a labour force adjustment plan (ERE) is eliminated.
2) The indemnification of 33 days per year of service in the case of the unfair dismissal of workers under permanent contracts becomes more widespread, with a maximum indemnification amounting to 24 monthly salary payments. This regulation shall only apply to the period of employment carried out as from the passing of the Royal Decree-law in the case of valid contracts at the time of entering into force. In any event, the right to an indemnification for up to 42 monthly salary payments shall be maintained.
3) The Spanish salary guarantee fund (FOGASA) shall only cover the discharge of contracts due to legitimate dismissal in the case of SME’s (with less than 25 employees).
4) Companies which dismiss more than 50 employees and are not in insolvency proceedings should formulate a plan for reallocating those affected, with measures lasting for at least six months.
E) Other measures.
1) Young workers up to 30 years of age (35 years in the case of women) shall have the option to capitalise 100% of their unemployment benefit upon the proposal of undertaking self-employed activity.
2) In the case of commercial contracts and top-level management contracts in state public sector entities, indemnifications may not exceed 7 days per year of service, with a maximum of 6 monthly payments.
III.- CONCLUSIONS
→ The new contracts allow greater compatibility between employment and training. Emphasis is placed on permanent contracts with a trial period of one year for companies with less than 50 employees.
→ Important rebates in Social Security contributions and tax deductions shall be made available to companies who contract new employees.
→ The faculty to reach collective bargaining agreements shall allow labour regulations to be adjusted to the specific circumstances of each company.
→ Reduction in the costs of unfair dismissal, although the problem of disproportionate dismissal costs of employees with many years of service has not been solved.
→ The causes for objective dismissal have been clarified, but they have not become sufficiently objective, therefore the use of court procedures regarding company decisions is expected.
→ The approval of labour force adjustment plans (ERE) is facilitated given the disappearance of the mandatory prior authorisation from the Administration. The regulation, which the Government plans to pass, shall fill the omissions not covered by the already passed Decree-law. In any case, decisions regarding labour force adjustment plans may not be appealed before the High Courts.
For more information, please contact:
Eduardo VILÁ: vila@vila.es/en
