During the last few years, Spain has faced its worst economic and financial crisis in terms of relevance, depth and duration. For this reason, the structural reforms that have been recently implemented have focused on sustained growth based on a change in the production model. These reforms have been basically threefold: the Spanish labour market, the financial system, and tax reform.
On the labour reform side, Royal Decree 3/2012, 10 February, which was confirmed with minor modifications by Law 3/2012, 6 July, implemented measures aiming for greater workforce flexibility in companies.
In particular, the new regulations reduced the cost of the employment terminations, particularly in case of dismissal without cause, as well as boosting permanent employment contracts and the collective negotiation process at company level.
On this issue, the employment reform of 2012 included changes to the collective bargaining process in order to adapt working conditions to the specific circumstances of production and to provide priority (in the main employment aspects, including salaries) for the company's collective agreement over the collective bargaining agreement for the whole sector. This change was designed to make the collective negotiation process an instrument of internal flexibility for companies, with a view to reducing the number of collective dismissals and individual redundancies for business related grounds. As a result, negotiations at company level in Spain will increase in the coming years.
Currently, among the European countries most affected by the global crisis, Spain, as a result of the implementation of these measures, is showing some of the most significant signs of positive results, according to a recent report from the European Commission.
In addition, in 2015 Spain is expected to experience a reduction in the number of collective dismissals and individual redundancies based on economical, technical, organisational and production grounds, since there is a greater flexibility in Spanish companies following the structural reforms which have been implemented.
On the other hand, the efforts made to reduce the cost of incorporation and the development of business for international companies have been successful, since the rate of creation of new companies has increased significantly since 2010. Therefore, it is expected that the business operations of multinational companies will make positive progress in the next few years. This is expected to lead to a higher number of recruitments in 2015 given the increase in business activity combined with lower costs.
A good example of this change in the national economic trend is the current situation of the automobile industry, which has opted for our country as one of the main industrial locations aiming for the optimum production level, backed up by the levels of employment and commitment to job creation.
From a tax perspective there will be a change to the tax treatment of severance payments due to employees as a result of their dismissal. Until now, statutory severance pay was fully tax exempt and not subject to Social Security. However, the final draft of the tax reform limits the maximum amount which would be exempt from taxes to EUR 180,000 even if the statutory severance exceeds that amount.
In view of all these circumstances, a change in the Spanish economic trend is being observed, which undoubtedly will affect not only national companies, but also multinational corporations already operating in Spain, as well as the ones that want to invest in the country in the coming years.