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The Reform of the Spanish Labour Market 2010

The financial crisis has prompted a large number of new laws aimed at bringing the Spanish labour market into line with the dire situation faced by many companies in this country. Though, clearly, the reform has not fulfilled its stated purposes it has  nevertheless resulted in the implementation of changes designed to give greater flexibility to labour relations and guarantee the Spanish social security system. Below we list the most important new laws that have substantially reshaped the Spanish labour market:

Definition of objective grounds

The reform began with theLaw 35/10 of 17 September, introducing a new definition of objective grounds for terminating or otherwise substantially amending a contract of employment, whether such grounds are of a financial, organisational, technical or production nature. Article 51 c) of the Spanish Statute of Workers, as amended, is intended to enable employers to act with greater legal certainty in these circumstances.

Relaxation of formalities applicable to temporary collective dismissals

The Law 35/2010 introduces a number of important modifications to collective dismissals:

  • It cuts the consultation period by half, with reference to the periods specified for termination procedures.
  • It sets out rules applicable to the procedure leading to a reduction in the number of working hours. The reduction must be anywhere between 10% and 70%.

It widens the scope of the right to a discount in the amount of Social Security contributions paid by employers in connection with common contingencies.  

Greater number of cases in which a contract for the promotion of permanent employment may be entered into

Also, the Law 35/2010 increases the number of cases in which a contract for the promotion of permanent employment may be entered into. Apart from the cases listed in the First Additional Provision, there are now other scenarios affecting: 

Changes relating to training contracts

The enactment of Royal Decree-Law 10/2011, of 11 February, has resulted in the following changes to training contracts: 

  • Unemployed people whose permanent contract of employment was terminated two years before entering into a contract for the promotion of permanent employment or who rendered their services on the basis on temporary contracts of employment only.
  • Women within two years after giving birth.
  • Unemployed women re-entering the labour market after five years of inactivity.
  • The age limit moves from 21 to 25. However, this type of contract may also be entered into with young, unskilled workers up to the age of 30 until 31 December 2013.
  • The contract must be entered into for a minimum of 1 year instead of six months.
  • Employers entering into a training contract may benefit from a discount of up to 100% in the amount they pay to the Social Security

Temporary removal of the 2-year limitation rule applicable to temporary contracts of employment

Pursuant to Royal Decree 10/2011, the applicability of section 15.5 of the Spanish Statute of Workers is suspended for two years. This means that an employee may now be a party to any number of temporary contracts of employment beyond the 2-year limitation stipulated in section 15.5 of the Spanish Statute of Workers.

Collective bargaining reform

Pursuant to Royal Decree-Law 7/2011, of 10 June, collective bargaining agreements may be extended between 8 months and 2 years upon expiry, depending on their original term. Upon the expiry of the extension the parties must refer the matter to binding arbitration. Also, company-level CBAs take now priority over provincial CBAs.

Reform of the pension system

The Law 27/2011, of 1 August, has turned the Spanish pension system upside down, particularly in regards to retirement pensions. The key changes are as follows: 

  • The retirement age is raised from 65 to 67, unless the relevant worker has been paying Social Security contributions for 38 years and six months.
  • There is an increase in the period of calculation of regulatory bases applicable to pensions which, at the end of the transitional period, will be 25 years instead of 15.
  • Implementation of tougher rules on early and part-time retirement. Special rules are also introduced in regards to pension plans and funds.


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