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Fargas
Tax and Labour Advising Barcelona

The new Labour Reform in Spain – Main points to single out

The purpose of this newsletter is to point out the most remarkable changes that the Spanish government has established in its highly heralded changes to labour policy, which have been published in the Spanish Official Gazette on the 11th of February 2012, containing the Executive order number 3/2012, that is expected to be modified in the Parliamentary stage.

We are going to highlight the main matters involved, that is, the ones regarding job creation, business flexibility and, of course, the new legal features and costs of layoffs, along with the possibility of avoiding in your business certain conditions envisaged in collective bargains.

1. MEASURES TO PROMOTE JOB CREATION.

The legal reform makes three noticeable changes: the formative contracts, the indefinite contract in support of entrepreneurs and the work at home contract: If young people between 16 and 30 years old is employed through formative contracts, assuming that the work activity is related with the formation received, there will be no costs in social insurances for both the employer and the employee as long as the contract is valid.

Likewise, when the contract expires (after three years) it will turn into an indefinite contract and the employer will hold a right to reduce the social insurance costs in 1.500 € yearly, or 1.800 € in case that the employee is a woman. Indefinite contract in support of entrepreneurs and small businesses

  1. It has been designed for businesses with less than 50 workers. In the first employment contract, from 12/02/2012, with an employee younger than 30 years, the employer will hold a right to apply a tax deduction of 3.000 €.
  2. Additionally, in case that the employer contracts unemployed people, it will hold a right to apply a tax deduction equivalent to 50% of the remaining unemployment benefits. In this procedure the probationary period will be of one year. Moreover, for the first time the law regulates the work at home contract, the one in which work performance is done mainly in the worker’s domicile.

Some other remarkable points:

  • Part-time employment contracts will be able to include overtime that will pay to Social Security like ordinary retributions.
  • From 31st of December of 2012 it won’t be possible to enchain limited-term contracts further than 24 months.
  • Social insurance costs will be reduced in 500 € yearly during three years when apprenticeship contracts, relief contracts and substitution contracts are turned into indefinite ones.
  • The bonuses for contracting older than 45 years, young people between 16 and 30 years old and handicapped people are kept.

2. MEASURES TO PROMOTE BUSINESS FLEXIBILITY.

A new job classification system will be established, creating professional groups and bringing together the professional skills, degrees and general contents of the work, including tasks and functions.

Working time: it will be possible to establish an irregular distribution of the working time throughout the year with the agreement of the workers’ representatives. In case that there is no agreement, the employer could distribute irregularly during the year no more than 5% of the working time.

The employer will be allowed to modify the working conditions regarding to the working day and its distribution, shifts, working methods and yields, system of remuneration, individually up to 9 workers. In businesses employing less than 100 workers, this measure won’t be considered collective, but as concerning partial unemployment.

The procedure to obtain reduced work day and the suspension of contracts gets simpler and doesn’t need the authorization of the autonomous government anymore. The bonus of 50% of the social insurance costs is kept. There will be also a right of resuming the unemployment benefits with a limit of 180 days.

3. NEW FEATURES AND COSTS OF LAYOFFS.

  • Regarding unlawful dismissal, the previous legal conditions are kept until the entry into force of the Executive order, that is, 45 days of salary per year of service, but a new limit of 33 days per year is established, up to a maximum of 24 months.
  • In the dismissal due to objective causes (economic, organizational, technical or productive) a new compensation of 20 days of salary per year of service up to a maximum of 12 months is established. Now the decline or expected decline of revenues for three consecutive quarters is considered as an economic cause. In businesses of less than 25 workers a part of the compensation due to the employee will be restituted to the employer by the Wage Guarantee Fund in an amount equal to 8 days of salary per year of service.
  • In case of layoff, procedural salaries are removed, except in case that they are declared unsuitable and the worker is readmitted (which is up to the employer, save in cases when the legal representatives of the employees are the ones being laid off, who are able to decide their reintegration in the workplace; in that cases, procedural salaries will apply).
  • Collective layoffs done by businesses with profits and more than 500 workers, affecting workers older than 50 years, will have to make a contribution to the public treasury.

4. ON AVOIDING IN YOUR BUSINESS THE CONDITIONS ENVISAGED IN COLLECTIVE BARGAINS.

When economic causes are involved (declining revenues for two consecutive quarters will be considered as such), or also technical, organizational or productive causes, by the means of an agreement between the employer and the legal representatives in order to sign a collective bargain, it will be possible to proceed –after a due period of consultation- to disregard in the business the working conditions provided by the applicable collective bargain.

The employer won’t be able to take unilateral measures in these cases. He will need to negotiate with the workers and overcome a complicated process. Vocational training Workers that have provided their service for more than one year in the company will hold a right to a paid leave of 20 hours yearly in order to receive training relevant to the particular job, that can be cumulated up to three years. In short, it is a reform with substantial changes and containing measures that, used appropriately, can indeed contribute to create new jobs and to increase business flexibility.

 

Certainly, many other possible measures have been left out, but, in any case, the ones that have now entered into force from 12 of February of 2012 are promising enough. Don’t doubt to contact us if you are interested in receiving additional information.

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