Spanish Employment Law Guide: Contracts, Wages, & More

Posted on Nov 4, 2024 in Law & Jurisprudence

1. Introduction to Spanish Employment Law

Law is a set of rules governing human relationships. These standards are demanded by society, established by the State, and backed by its powers.

Employment law could be defined as a set of rules for paid work, freely and voluntarily provided, with reliance on others.

Key Elements of Employment:

• Remuneration: The worker receives an amount in cash or in kind as payment for work performed.
• Voluntary: The worker provides labor services freely without coercion or pressure, considering that economic necessity does not mean lack of voluntariness.
• Direction: The worker is under the direction of an employer who establishes how, when, and where work is performed.
• Benefit to Employer: The fruit of the worker’s efforts benefits the employer. The worker receives a salary in return for that effort.

International and European Influences:

The International Labour Organization (ILO):

Composed of representatives from governments, unions, and employers’ organizations.

The European Union:

Spain joined the European Economic Community (EEC) following the signing of the Treaty of Maastricht.

The European Union has the ability to develop legislation through:

• Regulations: Have direct effect, i.e., are directly applicable in Member States.
• Directives: Binding regarding the results to be achieved. States are free to implement regulations to further the aims through a legislative mechanism called transposition.

3. The 1978 Spanish Constitution and Labor Law

The Spanish Constitution holds the highest rank among all legal standards in Spain.

We can divide the Constitution into three groups:

1. Fundamental rights and civil liberties
2. Rights and duties of citizens
3. Guiding principles for social and economic policy (from Article 39 onwards)

3.1. Relevant Principles:

• Right to freedom of association
• Right to strike by workers to defend their interests

Other fundamental rights with significant influence in the workplace include:

• Right to non-discrimination
• Right to honor and privacy
• Right to freedom of expression
• Right to assembly
• Right of association
• Right to education

Rights and Duties of Citizens:

• Right to work and duty to work
• Right to free choice of profession or trade
• Right to advancement through work
• Right to adequate remuneration without discrimination based on sex
• Right to collective bargaining
• Right to the adoption of collective action

4. The Structure of State Power

4.1. Legislature: Cortes Generales

Composed of two chambers:

• Lower house: Congress of Deputies
• Upper house: Senate

Types of Laws:

• Organic Laws: Develop fundamental rights and duties and other matters of special interest under the Constitution. Require an absolute majority in Congress for approval.
• Ordinary Laws: Develop other rights and duties and are approved by a simple majority.

4.2. Executive:

Formed by governments, both central and regional, and enforces laws made by the legislature.

Types of Regulations:

• Royal Decree: A standard with the force of law that the government can develop after parliamentary delegation to regulate a specific subject.
• Royal Decree-Law: A rule with the force of law prepared by the government in cases of extraordinary and urgent need, without prior parliamentary delegation.
• Regulation: Subordinate to the law. If developed by the Council of Ministers, it’s a Royal Decree; if delegated to a minister, it’s a Ministerial Order. Regulations complement and develop laws.

The Labour Administration:

The executive branch enforces labor laws through agencies integrated within the Labour Administration.

• The Employment Authority: (Ministry of Labour and Immigration), (Ministries of Labour and Employment)
• The Inspectorate of Labour and Social Security: Advises, mediates in labor relations, and investigates violations of labor, Social Security, or unemployment regulations.
• The Public Employment Services: Mediates between employers and job seekers, manages unemployment benefits.
• The Managing Bodies of Social Security: The National Institute of Social Security (INSS) manages Social Security benefits, and the General Treasury of Social Security (TGSS) collects contributions.
• The National Institute for Occupational Safety and Health at Work (INSHT): Analyzes and studies occupational safety and health, promotes improvements.

The Wage Guarantee Fund (FOGASA):

An autonomous body that pays workers part of their wages and allowances if their companies cannot afford them due to insolvency.

4.3. The Judiciary:

Composed of courts and judges, ensures law enforcement.

Social Jurisdiction Pyramid: Supreme Court, National Audience, Superior Courts, Social Courts

The judiciary interprets rules created by the legislature and the executive.

5. Sources of Labor Law

Sources of law include: the law, custom, and general principles of law. In employment law, collective agreements and the will of the parties expressed in the contract are also considered sources.

6. Principles for the Application of Labor Standards

6.1. Principle of Hierarchy:

Labor law sources are sorted by importance for application:

1. European regulations directly applicable.
2. The Spanish Constitution.
3. Treaties and conventions.
4. Laws. Such as the Workers’ Statute.
5. Regulations.
6. Collective agreements.
7. Employment contract.
8. Local and professional customs.
9. General principles of law.

6.2. Principle of”In Dubio Pro Operari”:

If a rule has different interpretations, the one most favorable to the worker is chosen.

6.3. Principle of the Most Favorable Standard:

When two rules govern the same aspect of work, the one most favorable to the worker is applied.

6.4. Principle of Non-Waiver of Rights:

An employee may not voluntarily waive their rights under the law or collective agreements.

7. The Employment Contract

7.1. Concept of Employment Contract:

An agreement between an employer and an employee whereby the employee agrees to work under the direction of the employer in return for remuneration.

The employment contract requires four key elements: voluntariness, provision of labor, dependency, and pay.

7.2. Capacity to Contract:

The two parties signing an employment contract are the employer and the employee. The Workers’ Statute defines both.

7.2.1. The Employer:

The person or entity that receives the work performed, gives orders, and pays a salary.

Individuals must be adults or emancipated and have the capacity to act.

Legal persons must meet all legal requirements for their constitution to hire workers.

7.2.1.1. Powers of the Employer:

• Power of Direction: Sets the mode, time, and place of work.
• Disciplinary Power: Can sanction breaches of obligations by the employee. Penalties are reflected in the collective agreement and may include suspension of employment and salary.

7.2.2. The Worker:

Any individual who provides services voluntarily, under the direction of the employer, in return for remuneration.

Workers must be at least 16 years old. Those under 18 need a permit from a parent or legal guardian unless emancipated.

7.2.2.1. Worker Rights:

Worker rights are found in all sources of labor law, with the most basic rights under the Constitution.

The Workers’ Statute, collective agreements, and employment contracts further develop these rights.

Main worker rights include:

• Non-discrimination
• Protection of safety and health
• Self-organization
• Collective bargaining
• Assembly and association
• Strike
• Promotion at work
• Vocational training
• Privacy
• Individual exercise of action arising out of the contract
• Timely payment
• Effective occupation in the company

7.3. Contents of the Contract, the Probationary Period:

Employment contracts can be written or verbal. If a person provides services as an employee under the direction of another for wages, an employment contract is deemed to exist even without a written agreement.

The law requires written contracts for all but two forms: contracts for circumstances lasting less than four weeks and regular permanent full-time contracts. However, even if a contract is verbal, either party can request it to be formalized in writing at any time.

7.3.1. The Probationary Period:

An optional period agreed upon in the contract where the employer verifies the worker’s ability and the employee assesses if the job meets their expectations.

Characteristics of the probationary period:

• Optional, but must be in writing if agreed upon.
• Worker has the same rights and obligations as permanent employees.
• Either party can terminate the relationship without reason.
• Cannot be established if the worker has previously been employed in the same role in the same company.
• Computation is interrupted during strikes, temporary disability, or maternity leave.
• Maximum duration is fixed in the collective agreement or by the Workers’ Statute.

7.3.2. Information in the Employment Contract:

Employment contracts must contain relevant information to identify the parties and working conditions, including:

• Type of contract
• Identity of the parties
• Worker’s professional category
• Workday (full or part-time) and its distribution
• Duration of contract and probationary period
• Initial basic salary, allowances, and frequency
• Holiday duration
• Reason for conclusion of contract (temporary contracts)
• Applicable collective agreement
• Location, date, and signature

7.4. Main Forms of Employment Contract:

7.4.1. Training Contracts:

Promote the incorporation of young people and unemployed individuals into the labor market.

7.4.1.1. Contract for Work Experience:

Allows workers to develop skills acquired during their studies.

7.4.1.2. Training Contract:

Provides young unemployed people with theoretical and practical training for a profession requiring a certain level of qualification.

• Worker must be over 16 and under 21 (or 24 in specific cases).
• Worker should not have a degree that would allow them to conclude a contract for work experience.

7.4.2. Fixed-Term Contracts:

Can be for an indefinite duration or a fixed period. Fixed-term contracts can be of three types:

• Contract for work or service
• Contract for production circumstances
• Interim contract

7.4.2.1. Contract for Work or Service:

Concluded for the execution of specific works or services with a determined duration.

7.4.2.2. Contract for Production Circumstances:

Meets specific market demands, excess workload, or temporary increases in activity.

7.4.2.3. Interim Contract:

Replaces a worker entitled to reserve their job or temporarily covers a position during the selection process.

7.4.3. Permanent Contracts:

7.4.3.1. Regular Indefinite Contract:

Held without a fixed end date.

7.4.3.2. Contract to Support Permanent Hiring:

A type of permanent contract with advantages for employers to encourage hiring specific groups of unemployed individuals.

7.4.4. Part-Time Contracts:

Provides a workday shorter than a comparable full-time worker.

7.4.5. Discontinuous Permanent Indefinite Contract:

For work that is indefinite but not continuous throughout the year.

7.4.6. Temporary Work Agencies (ETT):

Businesses that hire workers to be temporarily transferred to other companies (user companies).

• Must be formalized in writing, specifying the workday and the reason for the contract.

8. Working Time and Rest Periods

8.1. Workday:

The time an employee spends working for the company, usually expressed in hours per unit of time.

The maximum duration of the normal working week is 40 hours on average.

The workday cannot exceed 9 hours. Collective agreements may establish different distributions but must respect the 12-hour rest period between workdays.

The maximum daily hours for minors is usually 8, as agreed in the collective agreement, not exceeding the limit set by the Workers’ Statute.

8.1.1. Overtime:

Hours worked beyond the maximum of the normal workday.

Types of overtime:

• Structural Overtime: Generated by the company’s activity, such as contingency orders or unexpected absences.
• Non-structural Overtime: Occurs in circumstances other than structural ones.
• Force Majeure Overtime: Result of extraordinary events beyond the company’s control. Work is mandatory if requested by the employer.

Overtime can be compensated with money or rest time.

8.1.2. Weekly Working Time:

Cannot exceed 40 hours.

8.1.3. Working Day:

Maximum of 9 hours, with an average of 40 per week.

Continuous Schedule: Normal workday without interruptions.

Split Schedule: Workday divided into two periods with a break, usually at lunchtime.

8.1.4. Working Time:

Night work: Performed between 10 pm and 6 am.

8.1.4.1. Rest within the Workday:

If the workday exceeds 6 hours, the worker is entitled to a break of at least 15 minutes.

For workers under 18, if the workday exceeds 4 continuous hours, the break must be at least 30 minutes.

8.1.4.2. Daily Rest:

Minimum of 12 hours.

8.1.4.3. Weekly Rest:

Minimum of one and a half uninterrupted days.

8.2. Holidays:

Paid days off work.

8.3. Paid Leave:

8.3.1. Annual Leave:

Minimum duration is 30 calendar days.

9. Wages

9.1. Meaning of Salary:

The salary is the monetary reward received by the worker in return for providing their services. Workers are entitled to their salary on the agreed date and place, along with a payslip.

Salary can include:

• Compensation for expenses incurred due to work.
• Social Security benefits and allowances.
• Relocation allowances.
• Compensation for suspension or dismissal.

9.2. Types of Wages:

9.2.1. Form of Payment:

• Cash salary: Paid in money.
• Wages in kind: Paid in goods or services, up to a maximum of 30% of the total salary.

9.2.2. Form of Calculation:

• Wages per unit of time: Based on the time spent working.
• Wages per unit of work: Also known as piece rate, based on the amount of work produced.
• Joint Salary: A combination of wages per unit of time and wages per unit of work.

9.3. Minimum Wage:

The minimum wage (SMI) is the minimum amount established annually by the government, regardless of sex, age, profession, or category.

9.4. The Wage Guarantee Fund (FOGASA):

Guarantees workers’ salaries and severance pay in case of company insolvency or bankruptcy.

Financed by contributions from companies.

FOGASA covers:

• Payment of wages, including bonuses, up to a maximum of three times the daily minimum wage for 150 days.
• Payment of severance payments up to one year’s salary.

10. Wage Structure, Accruals, and Deductions

10.1. Wage Structure:

The distribution of wage components, set by collective agreement or employment contract.

10.2. Payslip:

A document detailing the worker’s earnings and deductions.

10.3. Structure of the Payslip:

• Header
• Liquidation period
• Accruals
• Deductions
• Date, signature, and stamp

10.4. Accruals:

All payments received by the employee during the payroll period. They are classified as wage and non-wage perceptions.

10.4.1. Wage Perceptions:

Salaries directly linked to the work performed.

10.4.2. Non-Wage Perceptions:

Compensation for expenses incurred during work or to cover periods of inactivity not due to misconduct.

Include compensation, Social Security benefits, and relocation allowances.

10.5. Deductions:

Amounts subtracted from the total due to obtain the net salary. Deductions can include:

• Taxes (income tax, social security contributions)
• Union dues (if applicable)
• Advances on salary
• Other deductions authorized by law or collective agreement

11. Mobility and Modification of Working Conditions

11.1. Functional Mobility:

A change in the functions normally performed by the worker.

• Horizontal functional mobility: Change to functions of the same level or category.
• Vertical functional mobility: Change to functions of a different level or category.

Vertical functional mobility can be:

• Ascending: New functions require a higher professional category.
• Descending: New functions correspond to a lower professional category.

11.2. Geographic Mobility:

A change in the worker’s place of work.

• Displacement: Temporary change of location.
• Transfer: Permanent change of location for a permanent worker.

12. Suspension of the Employment Contract

A temporary interruption of the employment relationship. For example, a worker suspended without pay for five days due to repeated disobedience. During the suspension, the worker does not work or get paid.

Suspension can be agreed upon between the employer and employee or established by law or collective agreement.

12.1. Causes of Suspension:

• Mutual agreement between the parties
• Causes defined in the employment contract
• Temporary disability
• Maternity, paternity, adoption, or foster care leave
• Exercise of public office or union representation
• Pre-trial detention
• Disciplinary reasons
• Economic, technical, organizational, or production reasons
• Leave of absence (paid or unpaid)
• Exercise of the right to strike
• Company closure
• Leave for victims of domestic violence

13. Termination of the Employment Contract

The end of the employment relationship.

13.1. Causes of Termination:

• Expiry of the agreed term (for fixed-term contracts)
• Resignation by the employee (with or without cause)
• Death or incapacity of the employer or employee
• Collective dismissal
• Dismissal for objective reasons (e.g., inability, lack of adaptation, economic reasons)
• Disciplinary dismissal (due to serious misconduct)

14. Settlement

A document signed by the employee upon termination of the contract, certifying the end of the employment relationship and detailing outstanding payments.

14.1. Compensation:

In some cases, termination of the contract involves compensation, which can be included in the settlement or a separate document.

15. Actions in Case of Dismissal

15.1. Conciliation:

A mandatory step before initiating legal proceedings, aiming to reach a settlement between the employer and employee.

15.2. Claim before the Social Court:

If conciliation fails, the employee can file a claim with the Social Court, providing proof of the conciliation outcome.

15.2.1. Dismissal Deemed Appropriate:

If the employer’s grounds for dismissal are proven and the procedure was followed correctly, the court declares the dismissal appropriate.

15.2.2. Dismissal Deemed Inappropriate:

If the court finds the grounds for dismissal unproven or the procedure incorrect, the dismissal is declared inappropriate.

In case of unfair dismissal for objective reasons, the compensation is 33 days of salary per year worked, up to 24 months.

15.2.3. Dismissal Deemed Null and Void:

Dismissal is considered null and void if motivated by discrimination or violation of fundamental rights.

In case of null dismissal, the worker is entitled to reinstatement and back pay.