Hiring employees in Spain involves navigating a complex legal and regulatory environment, with various rules and requirements in place to protect both workers and employers.
The Spanish labour framework is governed by the Spanish Constitution, the Workers’ Statute, and sector-specific agreements, providing legal clarity but also making the process bureaucratically demanding.
Employers can choose from several types of employment contracts, including indefinite, temporary, and part-time, each with different implications for employee rights, benefits, and costs. While indefinite contracts offer long-term stability and help retain employees, they come with higher costs in terms of severance payments and social security contributions. On the other hand, temporary contracts allow more flexibility but can be penalised if misused.
Labour costs for companies in Spain include the gross salary, employer social security contributions (adding 30-40% to the salary), and severance payments for unjustified dismissals. Social security contributions provide employees with coverage for healthcare, pensions, unemployment benefits, and work-related accidents. Employers also manage income tax withholdings and may offer additional benefits like holiday pay or meal vouchers. Overall, the total cost of employing someone is significantly higher than the gross salary.
In Spain, dismissals fall into three main categories, each with distinct legal implications. Redundancy, or despido objetivo, refers to lawful termination based on economic, technical, organizational, or production-related reasons, requiring employers to provide written notice, 15 days’ warning, and severance equivalent to 20 days’ salary per year worked, limited to a maximum of 12 months. Unfair dismissal, or despido improcedente, occurs when termination lacks legal justification or procedural compliance, with courts ordering either reinstatement with back pay or severance of 33 days’ salary per year, limited to a maximum of 24 months. Invalid dismissal, or despido nulo, arises when the termination violates fundamental rights, such as discrimination or retaliation, requiring employers to reinstate the employee and pay back wages. Each type can be contested in labour courts, exposing employers to financial and legal repercussions.
ERTEs: A useful tool for employers in emergency scenarios
ERTEs (Expedientes de Regulación Temporal de Empleo) offer a temporary solution for businesses facing financial difficulty or external crises, such as pandemics or economic downturns. ERTEs allow companies to temporarily suspend contracts or reduce working hours without laying off employees. There are two main types of ERTEs: one for unexpected events (fuerza mayor) and another for economic, technical, or organisational reasons. ERTEs are subject to a formal application process, negotiations with employee representatives, and authorisation by labour authorities.
While ERTEs provide economic flexibility and can help businesses avoid permanent layoffs, they come with limitations on duration and potential impacts on productivity. Additionally, the application process can be bureaucratically challenging. However, ERTEs help reduce costs, such as severance pay, and allow businesses to maintain a workforce during tough times, with employees continuing to receive unemployment benefits and their social security contributions intact.
For more information about employment in Spain please have a look to our guide to employment in Spain.
