Employment Law Review 2013/2014: Spain

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Are employment law changes aiding economic recovery in Spain? A range of important legislative changes came into force last year, continuing the trend of the Spanish labour market reform of 2012. In particular, part-time employment and internal flexibility played a special role. The support of entrepreneurship was also a priority, leading to two specific laws. These and other significant legislative changes are summarised in the Spanish Employment Law Review 2013/2014.

Originally posted on the Ius Laboris Knowledge Base: www.globalhrlaw.com
With thanks to our Spanish member firm Sagardoy Abogados.

Published in: Law, News & Politics, Career
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Employment Law Review 2013/2014: Spain

  1. 1. Employment Law Review 2013/2014: Spain Publication Date: 13 March 2014 Member Firm(s): Sagardoy Abogados Country: Spain A range of important legislative changes came into force last year, continuing the trend of the Spanish labour market reform of 2012. In particular, part-time employment and internal flexibility played a special role. The support of entrepreneurship was also a priority, leading to two specific laws. On the social security side, 2013 saw the completion of the pension reform initiated in 2011. Measures were adopted to ensure the financial viability of the social security system and promote active ageing. All these actions aim to put Spain on the road to recovery and the unemployment data is hopefully heading in that direction. In fact, the Government predicts the unemployment rate will go down slightly from 26.6% to 25.9% in 2014. The most significant legislative changes are summarised below. Urgent measures for employment and social protection of unemployed people Royal Decree-Law 1/2013, of 25 January, established an automatic mechanism to extend the enforcement of the so-called “Professional Requalification program for people no longer entitled to unemployment benefits”, until the unemployment rate falls to 15%. This program was created in order to avoid the social vulnerability of long-term unemployed. The latest change removes the legal uncertainty that previously surrounded the extension of the program. In addition, Royal Decree-Law 1/2013 contains other types of measures related to employment and social protection policies. The most important of these is the extension of the so-called “replacement right”. This permits workers who use their unemployment benefits in the context of the suspension of the employment relationship or the reduction of working time (as a policy of internal flexibility) to have full subsidy in case they become unemployed completely. Measures to encourage continuity of working life for older workers and promote active ageing
  2. 2. 2 Royal Decree-Law 5/2013, of 15 March, makes retirement benefits compatible with either paid employment or self-employment (in which case the benefit is reduced to the 50%). It also tightens up the requirements to qualify for early retirement and partial retirement. These changes are designed to improve the financial situation of the Spanish social security system, following on from the reform of 2011 (which increased the age of retirement to 67). A similar trend is apparent in other European countries. Measures to support entrepreneurs and stimulate growth and job creation Two laws on entrepreneurship were passed by the Spanish Parliament in 2013 - Law 11/2013, of 26 July, and Law 14/2013, of 27 September. Law 11/2013 established a significant package of incentives to promote job creation and entrepreneurship. In particular, it: • creates incentives for self-employment of young people and the creation of new companies; • encourages the recruitment of young workers through part-time contracts and practical training contracts - or by micro-companies, social economy enterprises or self-employed people; • provides incentives for the recruitment of long-term unemployed who are more than 45 years old by young self-employed entrepreneurs; • creates a new type of fixed-term contract: the so-called “first job contract”; and • permits temporary employment agencies to use the so-called “apprenticeship contract”. Law 14/2013 reformed several areas, including fiscal law, business law and administrative law. In relation to social law, it included the following changes: • reform of social security contributions in case of “pluriactivity”, i.e. mainly for those who work on both an employed and self-employed basis; • a new package of incentives to entrepreneurs; and • measures in the field of occupational risk-prevention, such as allowing owners of small businesses (fewer than 25 employees) personally to manage risk-prevention activities, providing technical support for such companies and creating an electronic risk-prevention book.
  3. 3. 3 Protection of part-time workers and other urgent economic and social measures Royal Decree-Law 11/2013, of 2 August, contains numerous economic and social measures. These include: • various changes to the protection of part-time workers, in particular the contribution periods for entitlement to social security benefits in order to bring Spanish law into line with the with recent European Court of Justice and Constitutional Court judgments; • creating greater legal certainty for recipients of unemployment benefits, by regulating benefit suspension and modifying the regime for infractions and sanctions under new obligations; and • reform of various sections in the Workers’ Statute related to action of the negotiating committee during the mandatory consultation period before the adoption of collective measures. Measures to foster hiring and improve employability Royal Decree-Law 16/2013, of 20 December, has three main targets: • promoting part-time contracts by reforming the regulation of the so- called “complementary hours” (a type of voluntary extension of working time), reducing social security contributions in order to make such contracts more attractive for employers, and allowing part-time hiring through entrepreneur support contracts; • promoting the use of the practical training contracts, especially by temporary employment agencies with public incentives; and • increasing social security contributions by introducing traditionally excluded concepts into the bases of contributions. Changes to social security pensions system Law 23/2013, of 23 December, allows the creation of a sustainability factor and redefinition of the revaluation index for pensions, in order to improve the economic and financial balance of the social security system. Conclusion The effects of the 2012 labour reforms and the more recent changes outlined above are clearly having a positive impact on recovery of employment in Spain, which is picking up quicker than expected. The policies being undertaken are not only helping to control the destruction of jobs but also encourage the creation of new ones. Notwithstanding this, with the worst part of the crisis having passed, we
  4. 4. 4 consider that further strategic reforms should be implemented, focusing on boosting and reinforcing employment. This could be achieved through four different but complementary channels: • reducing cost of employment contracts; • establishing a system of permanent hiring that is more attractive than the temporary one; • simplifying the law regulating the various types of contract for entering into an employment relationship; and • increasing, through flexibility, the use of part-time contracts - a major driving force for job-creation Originally posted on the Ius Laboris Knowledge Base: www.globalhrlaw.com About Ius Laboris Ius Laboris is an alliance of law firms offering employers cross-border employment and pensions law advice. It has 1,300 specialist HR lawyers in over 150 cities and 44 countries. Ius Laboris offers access to the best local HR law experts in one global team with 20% more ranked employment lawyers (Chambers & Partners, November 2013) than any other global HR legal services organisation. Further, Ius Laboris has 50% more recommended lawyers than its nearest rival in a recent survey in PLC's employment law guide. Clients include many household names as well as multinational companies in all sectors ranging from energy, retail and technology to pharmaceuticals. For more information on Ius Laboris, please visit iuslaboris.com.

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