Uncertain market leaves Spanish firms reluctant to look to long term

Despite strict control on labour contracting, Spain has suffered periods of the worst unemployment in Europe. August Toro of Spanish law firm Jausos, Nadal and Vidal de Llobatera, looks at regulations employers must use in employing and retaining staff

The Spanish labour market has historically been considered very rigid, and this inflexibility is one of the major causes of its high unemployment rates. As a result, employers have been very reluctant to establish indefinite employment contracts because of the difficulties involved in adjusting staff levels to the company’s needs.

On the other hand, the strict control to which labour contracting has been subject did not succeed in avoiding, in periods of crisis, the highest unemployment rates of Europe.

It is, therefore, obvious that labour regulations cannot be enacted against the market trends – in periods of economic growth employment increases, and in periods of crisis unemployment rises, whatever the cost of dismissal may be.

As a result of the present situation of economic expansion, the unemployment rate in Spain has substantially decreased. The price paid for it is a high degree of precariousness in employment as a great number of new labour contracts are implemented by means of temporary agreements. It does not seem likely that this situation will change, due to the high level of compensation otherwise payable by employers when terminating indefinite employment contracts.

Since the last general elections, the Government has been considering, with employers and trade unions, the possibility of reducing the cost of dismissal. Under current regulations it is, in general terms, 45 days’ salary per year of service up to a maximum of 42 months’ total salary. This is not proving to be an easy task and has not yet been resolved.

Consequently, of the two types of employment contracts available, indefinite and temporary, the most used one is the latter.

Temporary contracting

The main types of temporary agreements are the following:

Agreements for a fixed term

These can refer to a determined work or service, or be temporary due to production or transitional circumstances.

  • Agreements relating to a determined work or service The term of such agreements is uncertain, being tied to the time required for completion of the work or service involved.

  • Temporary contracts based on production requirements These are intended to meet special market needs, accumulation of work or excess orders. They cannot exceed six months in a 12-month period.

  • Interim agreements These may be used to fill the post of a worker who is entitled to return to a position after a period of leave (such as parental leave). The term of the appointment depends on the period of leave. Interim agreements must not exceed three months.

Training agreements

These can relate to professional practice or to training.

  • Practices agreement To enter into this the worker must obtain professional practice appropriate to his studies. The studies must only have been concluded within the four years preceding the contract. The term cannot be less than six months or more than two years.

  • Training agreement This is intended for workers over 16 years and under 21 who do not have the qualification required for the post for which they are applying – the purpose being to provide them with the qualification. The term cannot be less than six months or more than two years. The employer agrees to provide the worker with the necessary training and he has the obligation to issue a certificate upon termination of the contract, stating the theoretical training received and experience acquired.

Common characteristics in the above agreements include that they have to be made in writing and the worker must be registered with Social Security.

Any formal defect may be considered as fraudulent contracting and the worker would be considered as permanent. The temporary agreements can otherwise be terminated within the agreed time limit without resulting in the payment of any compensation.

Permanent employment

Permanent employment is regulated by the Workers’ Statute. Supplementing the statute are collective bargaining agreements in the various sectors which are negotiated, as a rule, on a yearly basis between trade unions and employers’ organisations. The Workers’ Statute and Collective Agreements are the two great pillars regulating labour relations.

The following characteristics are worthy of note:

  • Form of the agreement A written agreement is not required, so verbal contracting is permitted.

  • Trial period This must be in writing and cannot exceed six months for qualified technicians or two for other staff. No trial period can be established if the worker has previously fulfilled identical functions in the same undertaking.

  • Term The contract is indefinite unless any of the defined term options have been adopted.

  • Registration of the agreement The employer must inform the Employment Office that a contract has been executed. If it has been established in writing it must be registered, if it is a verbal contract a mere communication will be sufficient. The time limit for notification is 10 days from the date of the contract.

  • Social Security The worker must be registered with Social Security within the five days preceding the start of the rendering of services.

  • Discrimination The worker cannot be the subject of any discriminating measure. Any discriminating contractual provisions shall be null and void as a matter of law.

  • Salary Every year the Government publishes the minimum salary applicable in the Spanish territory, which for 2000 is 989.520 pesetas a year. Trade unions and employers’ associations negotiate every year the salary in each economic sector and for each category of workers.

  • Working hours Those agreed on in collective agreements; failing a collective agreement the limit is 40 hours per week.

  • Extra hours No more than 80 extra hours a year can be worked, only additional paid hours devoted to preventing or responding to accidents or other extraordinary and urgent situations are excluded.

  • Vacation 30 calendar days per year and they cannot be taken within the period of maximum activity of the undertaking.

  • Termination of the agreement This may be done on various detailed grounds. In brief, it may be terminated at the worker’s or at the employer’s initiative, although there are other reasons such as retirement, death of the employer or of the worker, force majeure, etc. When resigning, the worker must be given notice ranging, depending on the post, from seven days to two months (or even six months for senior executives). No notice is required from the employer if such termination is as a result of a disciplinary dismissal.

  • Non competition clause While the agreement is in force, the worker cannot render services for competitors. It may also be agreed that post-termination he or she may not join a competitor provided he receives appropriate financial compensation which is agreed between the parties. The term of this clause cannot exceed two years for technical personnel, or six months for other workers.

Employing foreign workers

Within the European Union there is freedom of movement and of employment of workers from other countries.

The Spanish regulations follow the rules of any other country of the European Community with respect to the employment of Community workers and freedom of movement and of employment of workers from other countries.

When workers from non EU member states are employed, it is necessary to execute first a pre-contract, the effectiveness of which is conditional upon the grant of a working and residence permit. When entering Spain the worker must be in possession of the corresponding residence visa obtainable from the Spanish Consulate in the worker’s country of residence. The residence visa is subject to the approval of the worker’s employment by the Ministry of Work and Social Affairs.

August Toro is a lawyer at Jausos, Nadal & Vidal de Llobatera

The Personnel Today guide to international employment law is edited by Clare Murray

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