Labor reform: fewer temporary contracts and more company flexibility

Automatic summary, not yet reviewed

1. Temporary contracts for a specific project or service may last no more than three years, extendable by twelve months under a collective agreement. After that, the worker becomes permanent. There is also a limit on chaining temporary contracts: anyone who works more than 24 months within 30 for the same company becomes permanent.
2. Severance pay at the end of a temporary contract rises to 12 days of salary per year worked, but gradually: 8 days in 2010 and one more day each year until reaching 12 in 2015.
3. The law redefines collective dismissal and the economic, technical, organizational or production reasons that justify it. The company must prove those reasons and show that the decision is reasonable to preserve its competitiveness or employment.
4. The contract promoting permanent hiring is extended to more groups, such as workers up to age 30, those over 45, and long-term unemployed people. In addition, the Wage Guarantee Fund will pay the employer 8 days of salary per year of service if these contracts end for objective reasons.
5. Collective transfers and substantial changes to working conditions will have shorter consultation periods, with rules for companies without worker representatives. Companies may also negotiate not applying the salary set in higher-level sector agreements when their economic situation justifies it.
6. Reduced working hours are strengthened as an alternative to dismissal: hours may be cut by between 10 and 70 percent for economic or technical reasons, with proportional unemployment benefits and bonuses for companies that keep jobs.
7. Bonuses for permanent hiring are reorganized, focused on young people with employability problems and long-term unemployed people over 45, with higher amounts for women. Training contracts get a full bonus on social security contributions and better pay, and the age limit to sign them is expanded.
8. For-profit private job placement agencies are now allowed, always with administrative authorization and free of charge for workers, and temporary work agency rules are adapted to the European directive, with equal treatment for assigned workers.

Who it affects

• Workers on temporary contracts: They can become permanent if the limits on contract duration or contract chaining are exceeded, and they will receive higher severance pay when the contract ends.
• Unemployed people, especially young people and those over 45: They will find it easier to be hired permanently and will have more training opportunities, but private agencies may also handle their job placement.
• Companies: They have more internal adjustment tools (reduced hours, transfers, changes to conditions) and bonuses, but must maintain their permanent workforce level.
• Placement agencies and temporary work agencies: They may operate with administrative authorization, charging workers nothing and under the oversight of public employment services.

Words worth knowing

Despido colectivo (collective dismissal)

Ending contracts for economic, technical, organizational or production reasons affecting a minimum number of workers within 90 days.

Fondo de Garantía Salarial (Wage Guarantee Fund)

Public body funded by employer contributions that pays part of severance or wages in certain cases.

Período de consultas (consultation period)

Time during which the company negotiates with worker representatives before taking measures such as transfers or collective dismissals.

Inaplicación salarial (salary non-application)

Agreement allowing a company to temporarily not apply the salary set in a higher-level sector collective agreement.

Empresa de trabajo temporal (temporary work agency)

Company that hires workers and assigns them to other companies to work there temporarily.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries