Labor reform: fewer temporary contracts and more flexibility for companies

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1. Contracts for a specific project or service may last no more than three years, extendable by twelve months through a collective agreement. If exceeded, the worker becomes permanent. Chaining temporary contracts is also limited: anyone contracted more than twenty-four months within thirty with the same company becomes permanent.
2. Severance pay at the end of a temporary contract rises to twelve days of salary per year of service, gradually: eight days for contracts signed through December 31, 2011, and one more day each year until reaching twelve in 2015.
3. The grounds for collective dismissal and for individual dismissal for economic, technical, organizational or production reasons are redefined. The company must prove the cause and show the decision is reasonable. Advance notice becomes fifteen days.
4. The contract promoting permanent hiring is extended to more groups, such as workers under 30, those over 45 and long-term unemployed people. In addition, the Wage Guarantee Fund will pay eight days of salary per year of service in economic dismissals under these permanent contracts.
5. Collective relocations and substantial changes to working conditions get faster consultation periods, capped at fifteen days. If there are no worker representatives, a committee may be set up to negotiate. Companies can negotiate not applying the pay terms of a sector agreement if their finances or jobs are at risk.
6. Temporary reduction of the workday between 10 and 70 percent is regulated as an alternative to dismissal in a crisis. The worker receives proportional unemployment benefits and, if later dismissed, can recover up to 180 days of benefits. Companies that include training in agreed plans can have up to 80 percent of their social security contributions waived.
7. Incentives for permanent hiring are reorganized: 800 euros per year for young people with employability problems and 1,200 for those over 45, with 200 euros more for women. Training contracts get a one hundred percent waiver of social security contributions.
8. For-profit private job placement agencies are allowed, always with administrative authorization and under the oversight of public employment services. The European directive on temporary work agencies is also incorporated, with equal treatment for assigned workers and removal of many restrictions from 2011.

Who it affects

• Workers on temporary contracts: Temporary workers can become permanent if duration or chaining limits are exceeded, and will receive higher severance when the contract ends.
• Companies: They can agree on relocations, changes to conditions, not applying sector pay terms, or workday reductions through faster procedures, and get incentives for permanent hiring or for cutting hours instead of firing.
• Young and long-term unemployed people: New incentives to hire them permanently and better conditions in training contracts, with improved salary and unemployment coverage.
• Placement agencies and temporary work agencies: They can operate with administrative authorization, charging workers nothing, and temporary work agencies see their restrictions reduced from 2011.

Words worth knowing

Contrato de fomento de la contratación indefinida

A permanent contract with slightly lower dismissal severance than an ordinary permanent contract, designed to make it easier to hire unemployed people on a stable basis.

Fondo de Garantía Salarial

A public body that pays workers part of their severance or wages when the company cannot. It is funded only by employer contributions.

Período de consultas

The time during which the company negotiates with worker representatives before making decisions such as collective dismissals or changes to working conditions.

Expediente de regulación de empleo

A procedure before the labor authority to authorize contract suspensions, workday reductions or collective dismissals for economic or similar reasons.

Inaplicación salarial

The possibility for a company and its worker representatives to agree not to apply the wages set in the collective agreement when the company's finances or jobs are at risk.

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