What changes in contracts does the “Spanish Labour Reform” imply?


February 14th 2022


If you plan to set up a company in Spain, you should be aware of what is going on legally. To provide you with some right hints, our expert, Maria José Martínez, on a radio interview for Cadena Cope in the program “Duros a cuatro pesetas”, goes over the main points of the Spanish Labour Reform and the effects of it to bear in mind.

Quim Esteban (radio host): The Spanish Congress of Deputies has just approved the Labour Reform decree. Now that it has been published, it is time for an expert, María José Martínez from Galibier Legal, to assess the concrete effects for workers and companies. María José, good morning

María José Martínez: Good morning, Quim. How are you?

QE: The question that many listeners who call us on Cope ask is whether this reform implies any change in the contracts with their current workers

MJM: Well, you see, a priori, the temporary contracts that were in force before the legislative change are not affected until they come to an end. So, if we have signed a temporary contract before 31 December 2021, this contract will be maintained in accordance with the old legislation. So, there is a kind of transitional regime in which, so to speak, the government allows us to adapt to what is to come and gives us three months, specifically from 31 December to 30 March, to continue using the old types of temporary contracts, but it must be very clear that these old types of contracts can be used but they can only have a maximum duration of six months. Those contracts that have been signed between 31 December and 30 March can only have a maximum duration of six months and then finally those contracts that start after 31 December and that will have the full application of the current regulations.

QE: mm So, what about the new contracts that will be made from now on?, What kind of  changes will they contain? Are they six months temporary or are they less? Are they discontinuous temporary?

MJM: Well, the discontinuous temporary ones are the other way round, they are discontinuous permanent ones

QE: Yes, sorry

MJM: Ok, the legislator has opted for this legal figure to cover the discontinuous permanent employees. More than anything else, this figure is like a temporality but a very cyclical one. So, it has been created for those companies or those businesses that have a recurrent and cyclical need of staff, such as the hotel and catering industry, especially due to seasonality. The legislator wants this type of fixed-term contract to be used, (which is nothing more than contracts that last for a few months of the year). However, the difference with the old temporary contracts is that, now, companies will always be obliged to contract the same previous workers.

QE: Does this mean that if the limit is exceeded they will automatically become permanent or should they sue the company? or how does it work?

MJM: This works the same as always. Temporality was sometimes used without let’s say a real causality. This kind of fraudulent temporality may only end up becoming a permanent contract if there is some labour inspection or if the worker sues.  If none of the previous conditions are met, obviously, a priori what you subscribe to and what it is in black and white, is a temporary contract, so to speak, due to circumstances of production. These are, indeed, the ones that remain in force, even if there is no real cause, nor there is any labour inspection, or the worker does not complain. In these cases, then, a priori, the temporary contract is presumed to be correct.

QE: So, María José, from what you say, are temporary contracts disappearing or are they being reformulated in general?

MJM: In general, they are not disappearing completely, but it is true that there are certain figures that were used in temporary contracts that are disappearing. What the new legislation does is a change of vision of the labour market and eliminates many of the temporary modalities that we used to have. Therefore, only two of them are left in force: one is for the substitution of workers, (such as when there is a medical leave and these kind of incidents), and the other is for circumstances of production. The modality of “circumstances of production” that also existed before, has changed a lot in its formulation, and now it is much more demanding. Additionally, it also introduces a word that tells us that it can only be used when there are occasional circumstances. This word, “occasional”, leaves out everything that is recurrent, as it is the case of the before mentioned seasonal industries.

QE: There has also been a lot of talk about changes in collective/company agreements, are there any changes in this regard?

MJM: The big change in the agreements is that until now company agreements could set up all kinds of agreements and they were above the sectoral agreements. This point has changed in one sense and that is that the salary, (which is negotiated in the company agreement) now cannot be lower than the salary that has been negotiated in the sectoral agreement. As for the rest, things can remain the same they were until now and will prevail above the conventions of the sectoral agreement. However, as far as salary is concerned, it is true that there is a prevalence of the sectoral agreement and then on the other hand, what was called ultra-activity, has been imposed as a rule, that is, all agreements will be in force indefinitely until there is no other agreement that is negotiated and replaces it.

QE: With the new reform, what advice can be given to employers when it comes to hiring?

MJM: Well, in all honesty, they should seek the experts’ advice to carry out a diagnosis or audit of their company. This way they will determine the best options for hiring and avoiding sanctions, which, by the way, have been made much tougher with this legislative change.

QE: It is not an issue that is directly related to the labour reform, but you also know that this week an agreement was reached between the government and the unions on the increase in the minimum wage. Whom does that affect? for it is also an issue of concern

MJM: Certainly. Yesterday the government reached an agreement without the Employer Stakeholders, that is, to raise the minimum wage to 1000 euros, i.e. 14 wages of 1000 euros paid yearly, starting from the 1st of January. Taking 2021 as a reference, this means an increase of 35 euros per month, well 14 times 35. According to figures from the Ministry of Labour, the increase affects 1.5 million employees and most of the employees affected by this increase are in the services sector, in other words, the services sector and the agricultural sector. So, obviously the salary increase affects small companies which in the end leads to an increase in Social Security contributions and obviously, given the post-pandemic situation, I don’t know if this is a good time to increase these fixed costs.

QE: Would this also imply a change in the contributions of the self-employed?

MJM: Well, indirectly, there is an increase in the minimum contribution base for the self-employed and this increase is small. The truth is that it goes from 944 euros to 960 euros for the minimum base and this represents a difference of around 6 euros in the contribution.

QE: Well, everything has altogether become clearer. María José Martínez is a lawyer and partner at Galibier Legal thank you very much for taking the call from Cope Catalunya and Andorra.

MJM: Thank you Quim, thank you very much.