On 30 December 2021, the Official State Gazette in Spain published the General Provisions of Royal Decree-Law 32/2021 covering urgent labour reform measures, required to ensure stability of employment and transformation of the labour market (complemented by the correction of errors published in the BOE on 19 January 2022). Although the measures entered into force on 31 December 2021, the Congress of Deputies validated it on 3 February 2022 (though the vote was exceedingly close, with just one deciding vote).

The Royal Decree states the objective of this reform is “to put an end to the serious problems of our labour market: unemployment and temporary employment”. The most important points of the new legislation focus on temporary contracts, temporary employment regulation processes and collective agreements.

Temporary contracts

The ‘work and service’ contract disappears (fixed-term or project-term – contracts with a specific end date) and employment contracts are now indefinite by general presumption. An employment contract may only be cancelled for two reasons: production circumstances or the replacement of an employee.

Fixed-term contracts: Circumstances permitted

These contracts can only be established in the following cases:

  1. In the event of occasional and unpredictable increase and oscillations in activity which, even in the case of normal activity of the company, generate a temporary mismatch between the stable employment available and what is required, provided that it cannot be covered with discontinuous fixed contracts. Maximum duration 6 months (by agreement up to 12 months).
  2. Replacement of annual leave. (maximum 6 months)
  3. To attend to occasional, foreseeable situations that have a reduced and delimited duration in the terms provided in this paragraph. In the last quarter of each year, companies must transfer an annual forecast of use of these contracts to the legal representation of employees and the contracts will have a maximum use of 90 non-continuous days per calendar year.

Replacement contracts

Replacement contracts can only be applied in the following cases:

  1. For the replacement of an employee with the right to reserve the job. The substitute and cause must be identified and the contract will have a duration of the time necessary for the substitution. Substitute and the employee to be replaced may handover for a maximum of 15 days.
  2. To complete the reduced working day by another employee, when said reduction is covered by causes legally established or regulated in the collective agreement. The substitute and the cause must be identified. Duration for the legally established time.
  3. For the temporary coverage of a job during the selection or promotion process to ensure definitive coverage by means of a fixed contract. The position for selection or promotion must be identified. Maximum duration 3 months.

Fixed-discontinuous contract

This type of contract is encouraged. The fixed-discontinuous contract is to be used for the performance of works of a seasonal nature, linked to seasonal productive activities, or for the development of those that do not have such nature but that, being of intermittent provision, have certain, determined or indeterminate execution periods.

There may be a period of inactivity of 3 months. After this period, the company must take corresponding measures (reinstatement, dismissal …)

Training contracts

The old training contracts disappear, and a single training contract is established, permissible in two specific circumstances: the alternation training contract, which will aim to make the paid work activity compatible with the corresponding training processes, and the training contract for obtaining the professional practice appropriate to the level of studies.

The ‘work and service’ contract disappears (fixed-term or project-term – contracts with a specific end date) and employment contracts are now indefinite by general presumption. An employment contract may only be cancelled for two reasons: production circumstances or the replacement of an employee

General considerations

  • The contract becomes indefinite if the requirements are not met.
  • The company must inform staff on fixed-term or temporary contracts, including training contracts, about the existence of vacant posts.
  • Compensation of 12 days’ salary per year of service at the end of the contract, including for training contracts.

This regulation on temporary contracts enters into force from 31 March 2022, establishing a transitional regime applicable to fixed-term contracts from 31 December 2021 to 30 March 2022. “Contracts for specific work and service and temporary contracts due to market circumstances, accumulation of tasks or excess of orders, held from 31 December 2021 to 30 March 2022, will be governed by the legal or conventional regulations in force on the date on which they have been agreed and their duration may not exceed six months.”

Temporary Employment Regulation Files

Regarding the Temporary Employment Regulation Files (ERTE), the Royal Decree includes the establishment of a seven-day limit on the consultation period for companies with less than 50 employees. In addition, a new type of ERTE is available – ‘temporary force majeure’, due to impediments or limitations on normalised activity.

Flexibility and employment stabilisation measures

The Decree also includes the incorporation of the RED Mechanisms for Flexibility and Stabilisation of Employment. This will allow companies to request measures to reduce working hours and suspend employment contracts, under two specific circumstances:

  • Cyclical: in the face of a general macroeconomic situation that advises the adoption of additional stabilization instruments (maximum duration of one year).
  • Sectoral: when a certain sector or sectors of activity undergo permanent changes that generate the need for employees to requalify or undergo professional transition processes (initial maximum duration of one year with the possibility of two extensions of six months each).

Royal Decree-Law 32/2021 entered into force on 31 December 2021, except for temporary and training contracts, which be in force from 31 March 2022.

There are more measures contained in Royal Decree-Law 32/2021, but these are the main points. For more information on these Labour Code changes and to discuss the impact on your Spanish operations, Auxadi’s payroll team is at your disposal.

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María Jesús Álvarez
Payroll Management Services Director

Local Knowledge – International Coverage

Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

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