Employment contracts
Collective redundancy procedure

Long-awaited labour market reforms were published in the Official State Gazette on February 11 2012 by means of Royal Decree-Law 32012. A primary objective of the reforms is to promote 'flexicurity' – a concept which combines flexible working conditions with job security.

Employment contracts

Open-ended contracts
Companies with fewer than 50 employees can sign a new type of open-ended contract with a one-year trial period for full-time workers. This contract has considerable tax incentives. Moreover, employees can combine their earnings with the 25% unemployment benefit (after a minimum of three years under this type of contract).

Apprenticeship and training contracts
Employees under the age of 30 are eligible for a three-year training contract. On expiry, employees will not be eligible for employment under this type of contract for the same job within the same profession in the same or any another company (although they will be eligible for different types of profession).

Training can be received at the company itself, provided that it has sufficient resources to offer the training.

Working time cannot exceed 75% of an ordinary working day during the first year of the contract and 85% during the second and third years.

Employees under this type of contract are eligible for a 100% allowance on their national insurance contributions.

Part-time contracts
A new regulation now allows for overtime to be performed under this class of contract.


The definition of 'economic, technical, organisational and production' causes for dismissal has been modified in order to improve flexibility and harmonisation. An 'economic cause' is defined as a persistent fall in income or sales over three consecutive quarters.

Severance compensation for unfair or wrongful dismissal is now 33 days' salary per year of service, up to a maximum of 24 months. Employees who signed a contract before the new law came into force are still eligible for compensation of 45 days' salary per year of service for employment rendered before February 12 2012.

'Intervening wages' for unfair dismissal – that is, the amount that a company must pay an employee in the interim period between the date of dismissal and the date of the court judgment – have been eliminated (except in specific scenarios, such as where the company chooses to reinstate the employee).

A new regulation has been introduced which establishes that public sector employees can now be dismissed for economic, technological, organisational or productive reasons.

Collective redundancy procedure

The causes (economic, technical, organisational and production) that justify collective redundancies have been redefined. Employers no longer require administrative authorisation to proceed with collective redundancy, except where the layoffs are caused by force majeure.

Although dismissal must be preceded by a period of talks and negotiations with employee representatives, those talks need not deal with or justify the causes for the collective redundancies.

A profitable company that makes collective redundancies affecting employees aged 50 or over must make monetary contributions to the Public Treasury in the following circumstances:

  • The company employs more than 500 workers or is part of a corporate group that employs more than 500workers; or
  • Even if economic, technical, organisational and production-related reasons exist for the redundancies, the company or its parent group made a profit in the two previous financial years before the year in which it commenced the collective redundancy procedure.

For further information on this topic please contact Ricardo Pradas Montilla at Pradas y Cebrián Asociados by telephone (+34 9170 103 90) or email ([email protected]).