The new Act modifies the definition of redundancies –i.e. a termination based on economic, productive, organizational or productive reasons, and includes some changes to the formal process to carry out a redundancy as follows:

  • The definition of each of the grounds for redundancies has been qualified, allowing companies to carry out redundancies not only when the company's viability is endangered but also when it may be reasonably evidenced that this would improve the future development of the company or the company's competitive position.
  • Notice period has been reduced from 30 days to a minimum of 15 days.
  • Non observation of the formal procedure now leads to the payment of the statutory severance and not to reinstatement.

The new Act provides for a new type of permanent contract of employment, having the following features:

  • In the event of a termination without cause, the employees are not entitled to the general statutory severance (45 days of salary per year of service) but to a reduced statutory severance (33 days of salary per year of service, capped as of 24 months' pay).
  • A portion of the reduced statutory severance (8 out of the 33 days of salary per year of service) is to be reimbursed to the company by a Special Guarantee Fund.
  • It can be entered into with a person on unemployment status, and to certain conversions of fixed-term contracts into new permanent contracts of employment.

Finally, the new Act provides for the following additional measures:

  • The future creation of a Capitalisation Fund, which from January 1, 2012, will allow the funding of a portion of the statutory severance applicable to terminations in Spain by a special new body.
  • The authorization of the creation of For-profit Employment Agencies, which are now allowed to intermediate in the labour market in Spain.