Navigating Employment Contracts in Spain: Insights for New Employers

When a company is exploring expanding their business into Spain, understanding the landscape of employment contracts is crucial for ensuring compliance with local regulations and fostering a positive work environment. Recently, we had a conversation with our partner Alvaro, a labor lawyer in Madrid, to discuss the types of contracts and probation periods relevant to new hires. Below, we share the key takeaways from our exchange, which can serve as a guide for other businesses entering the Spanish market.

1. Types of Employment Contracts in Spain

1.1 Indefinite and Fixed-Term Employment Contracts

Spanish employment legislation, particularly the Workers' Statute Law (Royal Legislative Decree 2/2015), presumes employment contracts to be of indefinite duration. Fixed-term contracts (also known as temporary contracts) are permissible only under the following specific circumstances:

Production Circumstances: These contracts address occasional, unforeseeable increases in activity or temporary mismatches between available employment and company needs, including mismatches caused by annual vacation of other company employees. The maximum duration is six months, extendable by another six months if this is allowed by a collective bargaining agreement that applies to in the company’s sector of activity. These fixed-term contracts can also cover predictable but short-term activities, limited to 90 days per calendar year. However, these 90 days cannot be used on a continuous basis.

Replacement of Employees: These contracts are used to replace employees on medical leave or other temporary absences that grant the employees to be replaced the right to their job reservation. The contract duration matches the absence period, with a possible overlap of up to 15 days to ensure smooth transitions. These fixed-term contracts can also be used to complete the reduced working day of another employee, if certain requirements are met.

1.1.A Fixed-Discontinuous Employment Contracts

Fixed-discontinuous contracts cater to seasonal work or intermittent activities with specific execution periods, such as agricultural work or retail jobs during holiday seasons. Employees under this contract type are entitled to be "called" back for service at the start of each new season or campaign. Failure to do so is considered a dismissal by the employer.

1.2 Senior Management Contracts

A unique contractual modality applies to senior management roles. This category is reserved for employees exercising significant autonomy and responsibility, only limited by the instructions of the company’s governing body (e.g., a company’s board of directors). This would typically a apply to a company's general manager. These contracts, governed by Royal Decree 1382/1985, are highly exceptional and come with distinct regulations that separate from ordinary employment contracts.

1.3 Duration of the Workday

Employment contracts can be full-time or part-time. This applies for indefinite, fixed-term and fixed-discontinuous employment contracts. 

The working time is defined in the applicable collective bargaining agreements or in the employment contracts. The maximum duration of the ordinary working time shall be 40 hours of effective work per week on an annual average. The number of ordinary working hours shall not exceed nine per day and between the end of one working day and the beginning of the next there must be a lapse of 12 hours. 

Employees have the right to request adaptations in the length and distribution of their working day, and in the way of providing their services, including the provision of their work remotely, in order to reconcile family and working life. Such adaptations must be reasonable and proportionate in relation to the needs of the employees and the organizational or productive needs of the company.

1.4 Annual Leave

The period of paid annual leave is normally regulated in the collective bargaining agreements or in the individual contracts. Its duration cannot be less than 30 calendar days. This period of annual leave cannot be replaced with financial compensation (except when the contract terminates and the accrued vacation period that has not been enjoyed is financially compensated). The concrete period of enjoyment of the annual vacation period has to be agreed between the company and the employee. 

In addition to the annual leave, employees enjoy 14 public holidays per year. 

1.4 Place of Service Provision

Services can be provided on-site, remotely, or through a hybrid model. Regular remote work, which is defined as working remotely at least 30% of the ordinary working time, is subject to specific legislation (Law 10/2021). This law regulates additional rights, protections and responsibilities for both employers and employees.

1.5 Remuneration

Salary is agreed between the employer and the employee in the employment contracts. Its amount must respect the minimums set forth by the applicable collective bargaining agreements. Salary in kind is very common but cannot exceed 30% of the employee's total remuneration. Normally, remuneration is paid in arrears, on monthly installments. Tax withholdings and social security contributions apply to the employees’ remuneration.  

2. Probation Periods

Probation periods for ordinary employment contracts, including management positions, are generally defined by the applicable collective bargaining agreements. If not specified in these collective agreements, the Workers' Statute stipulates the following:

- Maximum of 6 months for qualified technical workers.

- Maximum of 2 months for other workers.

- For companies with fewer than 25 employees, the probation period for non-technical workers cannot exceed 3 months.

- For fixed-term contracts not exceeding 6 months, the probation period is capped at one month unless otherwise specified in the collective agreement.

An exception applies to senior management contracts, which allow a probation period of up to 9 months, reflecting the significant autonomy and responsibility these roles entail.

3. Termination of Employment Contracts

Contracts can be terminated for a variety of reasons, including, amongst them, the resignation of employees and the dismissal by the company. Dismissals, which must follow a strict formal procedure, can be based on company situation (economic, technical, organizational or production reasons) or on a very serious infringements of employees. 

Conclusion

Understanding the intricacies of employment contracts in Spain is a crucial step for businesses looking to expand successfully while ensuring compliance with local labor laws. From selecting the right contract type to defining probation periods and termination procedures, every decision plays a key role in the stability and growth of your company. By working with local experts and implementing best practices from the start, businesses can mitigate risks and foster strong, long-term relationships with their employees.

At moviinn®, we specialize in guiding companies through the complexities of international expansion, ensuring a seamless and legally compliant hiring process in Spain. Whether you’re setting up a new team or refining your employment strategies, our team is here to help.

Get in touch with us today to ensure your hiring process in Spain is smooth, compliant, and optimized for success!