Spanish Labor Law Essentials: Employment Contracts & Social Security

Posted on Jul 11, 2025 in Tourism

Salary Definition and Types in Spain

Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. In Spain, it can be paid:

  • On an hourly, daily, weekly, monthly, or yearly basis.
  • In cash (cheques, bank transfers, money).
  • As perks (e.g., lodging, car, private medical care) or rest time, which count as job performance.
  • Perks cannot exceed 30% of the total salary payments.

National Minimum Wage and Salary Guarantees

  • The National Minimum Wage (Salario Mínimo Interprofesional – SMI) is the minimum amount a worker must receive by law for a full-time job (40 hours per week). If working hours are less, the wage is proportional.
  • Two guarantees of salary:
    • Payments in cash must not be lower than the National Minimum Wage.
    • Perks cannot exceed 30% of the total salary.

Wage Guarantee Fund (FOGASA) in Spain

The Wage Guarantee Fund (Fondo de Garantía Salarial – FOGASA) in Spain is a public entity that ensures workers receive unpaid salaries or compensations if their employer becomes insolvent or bankrupt.

  • It covers unpaid wages up to a certain limit, usually based on the daily minimum wage multiplied by a maximum number of days.
  • It also covers compensation due to unfair dismissal, contract termination, or business closure under legal conditions.

Salary Income: Basic Pay and Additional Payments

  • Basic salary: The fixed amount agreed upon for the job.
  • Additional payments: Overtime, bonuses, and commissions.
  • Annual bonuses: Spanish law mandates at least two extra payments per year, typically in summer and Christmas (pagas extraordinarias).

Non-Salary Payments and Benefits

  • These are payments not considered part of the salary, such as compensations for expenses (e.g., transportation, meals, work-related tools).
  • Other non-salary benefits include severance pay, travel allowances, and indemnities.

Payslip Deductions for Workers in Spain

  • Social Security contributions, which include pensions, unemployment benefits, and healthcare.
  • Income tax (IRPF – Impuesto sobre la Renta de las Personas Físicas), which is withheld based on the worker’s salary and personal circumstances.
  • Other possible deductions, such as union fees or salary advances.

Social Security Contribution Bases Calculation

  • The Common Contingencies Contribution Basis is calculated based on the total salary, including the basic salary and additional payments, but excluding non-salary payments. This is used to determine contributions to Social Security for general protections like retirement and health insurance.
  • The Professional Contribution Basis includes all earnings related to professional risks and work-related accidents, varying by sector and job category.

Functional Mobility: Changes in Job Duties

  • A worker may be required to perform duties of a higher or lower category than originally hired for.
  • This change can occur within the same professional group or to a different category, which may lead to a salary adjustment.

Permanent Transfer vs. Temporary Displacement

  • Permanent transfer: A definitive change of workplace requiring relocation.
  • Displacement: A temporary relocation of the worker.
  • Options for the worker:
    • Accept the change.
    • Challenge the decision in court.
    • In some cases, receive compensation if the change affects working conditions significantly.

Substantial Changes to Work Contracts and Worker Rights

  • Changes due to economic, technical, organizational, or production reasons.
  • Reduction of salary, changes in working hours, or modification of job functions.
  • The worker can:
    • Accept the changes.
    • Resign with compensation (in specific cases).
    • Challenge the decision legally.

Work Contract Suspension Causes (Excluding Leave)

  1. Temporary disability (sick leave).
  2. Maternity or paternity leave.
  3. Strike participation.
  4. Disciplinary suspension.
  5. Force majeure situations (e.g., natural disasters).

Five Causes for Disciplinary Dismissal

  1. Repeated unexcused absences or lateness.
  2. Disobedience or insubordination.
  3. Verbal or physical aggression in the workplace.
  4. Workplace harassment or discrimination.
  5. Theft or fraud against the company.

Types of Extended Leave and Absences

Extended leave or absence allows employees to take time off for personal or professional reasons while maintaining a right to return to work. The most common types in Spain are:

  1. Leave for family care: Workers can request leave to take care of a child (up to 3 years old) or a dependent relative. This type of leave does not grant a salary but ensures job protection for a certain period.
  2. Voluntary leave: Workers can request a leave of absence for personal reasons (e.g., travel, education, personal projects). This is unpaid and can last from a minimum of 4 months to a maximum of 5 years. However, there is no job guarantee upon return, only a preferential right to reemployment.
  3. Public duties leave: Employees elected to public office (e.g., city council, parliament) or fulfilling jury duty can take leave for the duration of their service. This leave is usually unpaid, but the job position is reserved.

Worker-Initiated Employment Contract Termination

A worker may decide to terminate their employment contract voluntarily. The main cases include:

  1. Resignation: The worker chooses to leave the job and must give prior notice (usually 15-30 days, depending on the contract or collective agreement). No compensation is granted.
  2. Constructive dismissal: If the employer significantly worsens working conditions (e.g., unpaid wages, harassment, unilateral contract changes), the worker can resign and claim unfair dismissal to receive compensation.
  3. Retirement: The worker ends their employment upon reaching the legal retirement age and meeting the necessary contribution requirements for a pension. Some agreements allow for early retirement with special benefits.

Judicial Judgments on Dismissal: Fair, Unfair, Void

  1. Fair dismissal: The dismissal is justified by law (e.g., serious misconduct).
  2. Unfair dismissal: The employer had no valid reason or did not follow proper procedures. The worker can be reinstated or receive compensation.
  3. Void dismissal: The dismissal violates fundamental rights (e.g., discrimination, pregnancy-related). The worker must be reinstated immediately.

Objective Reasons for Dismissal in Spain

This type of dismissal occurs when the company has justified economic, technical, organizational, or production-related reasons that make the worker’s position unsustainable. It differs from disciplinary dismissal because it is not based on worker misconduct but on business-related necessities. Common reasons include:

  • Economic reasons: The company is experiencing financial losses and needs to reduce its workforce.
  • Technical reasons: Changes in technology make the worker’s role obsolete.
  • Organizational reasons: Internal restructuring leads to the elimination of positions.
  • Production reasons: A decrease in demand or changes in market conditions affect the company’s ability to maintain the worker’s position.

Spain’s Social Security System Defined

The Social Security System in Spain is a public system that provides economic and healthcare protection to workers and their families in cases of illness, disability, maternity, retirement, unemployment, and other social risks. It is financed through contributions from employers, employees, and the government.

Contributory Modality of Social Security in Spain

The contributory modality applies to individuals who contribute financially to the system through payroll deductions or self-employment contributions. It covers:

  • Employees working under an employment contract.
  • Self-employed workers (Autónomos).
  • Civil servants under specific regimes.
  • Certain special categories, such as agricultural workers, household employees, and seafarers.

This modality provides benefits based on the contributions made during a worker’s professional life.

Financial Benefits for Temporary Impairment

Workers receive financial benefits while on temporary impairment, calculated as a percentage of their regulatory base:

  • Common illness or non-work-related injury:
    • 60% of the regulatory base from day 4 to 20.
    • 75% from day 21 onwards.
  • Work-related accident or occupational disease:
    • 75% of the regulatory base from the first day.
  • The employer usually pays the benefit for the first 15 days, after which the Social Security system or a mutual insurance company assumes responsibility.

Employer Social Security Obligations in Spain

  1. Register the company with the Social Security system before hiring workers.
  2. Enroll employees in the Social Security system upon hiring.
  3. Pay Social Security contributions for each employee, covering different contingencies such as healthcare, pensions, unemployment, and occupational risks.
  4. Withhold and submit employee contributions deducted from their salaries.
  5. Report any changes in employee status (new hires, contract terminations, salary changes).
  6. Ensure workplace safety and health according to labor regulations.

Temporary Impairment: Concept, Causes, Duration

Temporary impairment (also known as temporary disability) refers to a worker’s inability to perform their job due to a health condition, with the expectation of recovery.

Causes:

  • Common illness or non-work-related injury.
  • Work-related accident or occupational disease.
  • Maternity-related conditions (including pregnancy complications).

Duration:

  • The maximum duration is 365 days, extendable by 180 additional days if medical recovery is expected.
  • If the worker does not recover after this period, they may be evaluated for permanent disability.

Types of Permanent Disability in Spain

Permanent disability is recognized when a worker cannot perform their job after exhausting medical treatment. Two common types are:

  1. Partial Permanent Disability:
    • The worker has lost at least 33% of their work capacity but can still perform some tasks.
    • They receive a one-time compensation payment equivalent to 24 months of their regulatory base.
  2. Total Permanent Disability:
    • The worker cannot perform their usual job but can still work in another profession.
    • They receive a lifetime pension equivalent to 55% of their regulatory base, which can increase to 75% at age 55 if they struggle to find alternative employment.