New legislation in Spain (Royal Decree 8/2010) has introduced several measures aimed at alleviating the effects of the current economic crisis.
There are three significant changes which affect employers and employees:
- Suspension of the majority of pension increases for the financial year 2011;
- Removal of the one-off payment on the birth or adoption of a child; and
- Abolition of the transitional regime relating to partial retirement, provided by Law 40/2007. This transitional regime temporarily lowered the access requirements to the partial retirement provisions established in the Social Security legislation. Consequently, the access requirements have reverted to the employee being 61 or over and having both contributed to the Social Security System for at least 30 years and a minimum of six years’ service with the final employer.
Another important change is the five per cent reduction in the salaries of public sector employees. In order to minimise its impact on lower-paid employees, however, the reduction will be applied in stages.
Employers and Trade Unions are also currently seeking to negotiate a number of employment law reforms, which, if agreed, will also be formalised by Royal Decree. The key issues under negotiation are:
- a reduction in Social Security contributions;
- a increase in the retirement age;
- a reduction in pay rates for temporary workers;
- cash incentives for companies recruiting young people;
- the substitution of redundancy pay with a “severance pay fund”. Under the proposed system, an
- employee would accumulate a severance pay fund during his working life;
- increased geographical mobility;
- reduced annual working hours (depending on the particular workload); and
- harmonisation of the reduction of working hours with rates of unemployment benefit.