Employment Law in Spain: Frequently Asked Questions

Spanish employment law is one of the most regulated labour frameworks in the European Union, and non-compliance carries significant financial and reputational consequences for international businesses. The Estatuto de los Trabajadores (Workers'; Statute, Royal Legislative Decree 2/2015) governs the core employment relationship, while sector-specific collective agreements - convenios colectivos - frequently impose obligations that exceed the statutory minimum. This article answers the most frequently asked questions about employment law in Spain, covering contract types, dismissal procedures, severance calculations, collective bargaining obligations, and the practical risks that foreign employers consistently underestimate.

The Estatuto de los Trabajadores establishes the indefinite contract (contrato indefinido) as the default form of employment in Spain. Fixed-term contracts are permitted only in narrowly defined circumstances, and the 2021 and 2022 labour reforms - implemented through Royal Decree-Law 32/2021 - substantially restricted their use. Employers who misclassify a temporary worker risk automatic conversion of the contract to indefinite status, together with potential fines from the Labour Inspectorate (Inspección de Trabajo y Seguridad Social).

The main contract categories currently available are:

• Indefinite contract (contrato indefinido): the standard form, with no expiry date and full statutory protections.
• Fixed-term contract for production circumstances (contrato por circunstancias de la producción): limited to 90 days per calendar year and non-renewable consecutively.
• Substitution contract (contrato de sustitución): used to replace a worker on leave, with a clear return-to-work date.
• Training and apprenticeship contract (contrato de formación en alternancia): for workers under 30, combining work with formal education.
• Part-time contract (contrato a tiempo parcial): requires written specification of hours and strict overtime controls.

A common mistake among international employers is using fixed-term contracts to cover roles that are structurally permanent - for example, a permanent sales function described as a "project." Spanish courts and the Labour Inspectorate look at the substance of the role, not the label. If the position is ongoing, the contract will be treated as indefinite regardless of its written terms.

In practice, it is important to consider that collective agreements in the relevant sector may impose additional requirements on contract form, probationary periods, and working hours. A technology company in Madrid, for instance, falls under the Convenio Colectivo Estatal de Empresas de Consultoría, which sets specific salary grades and notice obligations that override the statutory minimums where they are more favourable to the worker.

The probationary period (período de prueba) is capped at six months for qualified technicians and managers, and two months for other workers, unless a collective agreement specifies a shorter period. Termination during the probationary period does not require cause and does not generate severance, but the employer must still comply with anti-discrimination rules - a non-obvious risk that produces litigation when the termination coincides with a protected event such as pregnancy or union membership.

To receive a checklist on employment contract compliance in Spain, send a request to info@vlolawfirm.com.

Dismissal in Spain is a highly regulated area governed by Articles 49 to 56 of the Estatuto de los Trabajadores. Spanish law recognises three main categories of dismissal: disciplinary dismissal (despido disciplinario), objective dismissal (despido objetivo), and collective dismissal (despido colectivo). Each category has distinct procedural requirements, notice obligations, and severance consequences. Choosing the wrong category - or failing to follow the correct procedure - converts a potentially valid dismissal into an unfair dismissal (despido improcedente) or, in the most serious cases, a null dismissal (despido nulo).

Disciplinary dismissal is based on a serious and culpable breach by the employee, such as repeated absenteeism, insubordination, or breach of good faith. The employer must deliver a written dismissal letter (carta de despido) specifying the facts, the date of effect, and the legal grounds. No prior notice period is required, and no severance is payable if the dismissal is later upheld as fair (despido procedente). However, the burden of proof lies entirely with the employer: the employer must demonstrate the facts stated in the letter, and cannot introduce new grounds at the conciliation or court stage.

Objective dismissal applies when the reason is not the employee';s fault but relates to the employee';s capacity or to genuine economic, technical, organisational, or production reasons affecting the company. The procedural requirements under Article 53 of the Estatuto de los Trabajadores are strict:

• Written notice specifying the cause must be delivered to the employee.
• A minimum notice period of 15 days must be given, or payment in lieu.
• Severance of 20 days'; salary per year of service, capped at 12 monthly payments, must be paid simultaneously with the dismissal letter.

Failure to pay the severance at the moment of dismissal automatically renders the dismissal procedurally defective, which in practice converts it to unfair dismissal with higher severance consequences.

Collective dismissal (Expediente de Regulación de Empleo, or ERE) applies when the thresholds in Article 51 of the Estatuto de los Trabajadores are met - for example, dismissing 10 or more workers in a company of fewer than 100 employees within 90 days for economic or organisational reasons. An ERE requires a formal consultation period of at least 30 calendar days (15 days for companies with fewer than 50 workers) with employee representatives, notification to the labour authority (Autoridad Laboral), and a good-faith negotiation process. The severance minimum is 20 days per year of service, capped at 12 monthly payments, but collective agreements or negotiated settlements frequently increase this.

A non-obvious risk in collective dismissals is the concept of "fraudulent ERE" - where a company dismisses workers individually using objective grounds but the total numbers over a 90-day period exceed the ERE thresholds. Spanish courts have consistently treated this as a circumvention of the collective procedure, rendering all individual dismissals null and requiring reinstatement.

The consequence of unfair dismissal (despido improcedente) is significant: the employer must either reinstate the employee or pay severance of 33 days'; salary per year of service, capped at 24 monthly payments. For dismissals of employees hired before February 2012, a transitional calculation applies that can substantially increase the total amount. Senior managers (personal de alta dirección) operate under a separate regime governed by Royal Decree 1382/1985, with different notice and severance rules.

Severance pay (indemnización por despido) in Spain depends on the type of dismissal and its legal outcome. Understanding the calculation is essential for financial planning, particularly when restructuring a Spanish workforce.

For fair objective dismissal, the formula under Article 53 of the Estatuto de los Trabajadores is 20 days of salary per year of service, with a maximum of 12 monthly payments. "Salary" for this purpose includes the base salary and any fixed supplements, but excludes variable components unless they are contractually guaranteed - a distinction that generates frequent disputes.

For unfair dismissal, the formula rises to 33 days per year of service, capped at 24 monthly payments. The employer has the option to reinstate the employee instead of paying severance, but in practice most employers opt for the economic compensation. If the employee is a workers'; representative (delegado de personal or miembro del comité de empresa), the choice of reinstatement or compensation belongs to the employee, not the employer.

Null dismissal (despido nulo) - which arises when the dismissal violates a fundamental right, such as dismissing a pregnant employee or a worker who has recently exercised a right to family leave - carries the most severe consequence: mandatory reinstatement with full back pay for the period of separation, plus the employee retains all accrued rights. There is no financial cap.

Practical scenarios illustrate the range of outcomes:

• A sales manager with eight years of service earning EUR 4,000 per month gross is dismissed for objective economic reasons. Fair dismissal severance: 20 days x 8 years = 160 days, approximately EUR 21,333. If the dismissal is later found unfair: 33 days x 8 years = 264 days, approximately EUR 35,200.
• A warehouse worker with 15 years of service, hired before February 2012, is dismissed unfairly. The transitional calculation applies: 45 days per year for the pre-2012 period and 33 days per year thereafter, potentially producing a total well above the standard cap.
• A company with 60 employees initiates an ERE affecting 12 workers. Minimum statutory severance is 20 days per year per worker, but the negotiated agreement in the consultation period reaches 30 days per year - a common outcome when the company has strong financials.

Many international employers underappreciate the impact of accrued but unpaid salary components - outstanding variable pay, untaken holiday, and pro-rated bonuses - which must be settled at the time of termination. Failure to pay these amounts in full exposes the employer to additional claims before the Social Courts (Juzgados de lo Social).

Spain';s collective bargaining system is one of the most extensive in Europe. Collective agreements (convenios colectivos) are legally binding on all employers and employees within their scope, regardless of whether the employer is a member of the employers'; association that negotiated the agreement. This is a structural feature of Spanish labour law under Article 82 of the Estatuto de los Trabajadores that surprises many foreign businesses establishing operations in Spain.

Identifying the applicable collective agreement requires analysis of the company';s activity code (CNAE code), the geographic scope of the agreement, and the functional scope. A foreign company setting up a logistics subsidiary in Barcelona may find itself bound by both a sector-level national agreement and a provincial agreement, with the more favourable provisions for workers prevailing. Failure to identify and apply the correct agreement is one of the most common compliance failures identified by the Labour Inspectorate during audits.

Social security contributions in Spain are among the highest in the EU. Employer contributions cover contingencias comunes (common contingencies), unemployment, professional training, wage guarantee fund (FOGASA), and occupational accident insurance. The combined employer contribution rate is substantial, and the base for contributions includes not only base salary but also most regular supplements and benefits in kind. International employers frequently underestimate the total employment cost when modelling Spanish headcount.

The Salario Mínimo Interprofesional (SMI, minimum interprofessional wage) is set annually by the government and applies to all workers in Spain regardless of sector. The applicable collective agreement may set higher minimums, and in practice most sector agreements do. Paying below the collective agreement minimum - even if above the SMI - constitutes a labour infringement subject to fines.

For companies with 50 or more employees, the obligation to establish an equality plan (plan de igualdad) under Organic Law 3/2007 and its implementing regulations is mandatory. The plan must be negotiated with employee representatives, registered with the competent authority, and reviewed periodically. Non-compliance carries fines and can result in exclusion from public procurement.

To receive a checklist on collective bargaining compliance and social security obligations in Spain, send a request to info@vlolawfirm.com.

Foreign nationals from outside the European Economic Area require a work permit (autorización de trabajo) to be employed in Spain. The main route for company-sponsored employment is the initial work and residence authorisation (autorización inicial de residencia y trabajo por cuenta ajena), processed through the relevant provincial delegation of the Secretaría de Estado de Migraciones. Processing times vary by province but typically run from several weeks to several months, and the employer must demonstrate that the position cannot be filled by a Spanish or EEA national - the so-called "national employment situation" test (situación nacional de empleo), with exceptions for shortage occupations.

The intra-company transfer route (traslado intraempresarial) under Law 14/2013 on support for entrepreneurs provides a faster pathway for managers, specialists, and trainees being transferred from a foreign group entity to a Spanish subsidiary. This route does not require the national employment situation test and can be processed more efficiently, making it the preferred mechanism for multinational groups relocating key personnel.

Posted workers (trabajadores desplazados) - employees sent temporarily to Spain from another country to perform services - are subject to the mandatory provisions of Spanish labour law under Law 45/1999, which implements the EU Posted Workers Directive. The mandatory provisions include minimum wage, maximum working hours, minimum rest periods, health and safety rules, and anti-discrimination protections. Since the 2020 amendment implementing Directive 2018/957, long-term posted workers (those posted for more than 12 months, extendable to 18 months with notification) are entitled to the full set of Spanish employment conditions, not merely the mandatory minimum.

A common mistake is treating a posted worker as fully subject to the home country';s employment law. Spanish labour authorities and courts apply the mandatory provisions automatically, and the Labour Inspectorate has increased scrutiny of cross-border posting arrangements, particularly in construction, transport, and professional services.

Remote work arrangements involving employees based in Spain but employed by a foreign entity raise complex questions of applicable law, social security registration, and permanent establishment risk. Under the applicable EU social security coordination rules (Regulation 883/2004), an employee habitually working in Spain is generally subject to Spanish social security, regardless of where the employer is registered. Failure to register and contribute generates significant back-payment liability, including interest and surcharges.

Practical scenarios for cross-border employment:

• A US technology company hires a software developer in Madrid on a direct employment contract. The company must register as an employer with the Spanish Social Security (Tesorería General de la Seguridad Social), apply the relevant collective agreement, and comply with all Spanish employment law obligations - including the right to disconnect (derecho a la desconexión digital) under Article 88 of Organic Law 3/2018.
• A German company posts a project manager to Spain for 14 months. After 12 months, the full Spanish employment conditions apply, including any applicable collective agreement salary scales.
• A UK company with no Spanish entity engages a Spanish resident as a "freelancer." If the economic dependence and integration criteria of the Estatuto del Trabajo Autónomo (Law 20/2007) are met, the individual may qualify as a TRADE (trabajador autónomo económicamente dependiente) or, more seriously, the relationship may be reclassified as an employment contract, triggering full employment and social security obligations retroactively.

Employment disputes in Spain follow a mandatory pre-litigation conciliation procedure before reaching the courts. Before filing a claim with the Social Courts (Juzgados de lo Social), the claimant must attempt conciliation before the relevant administrative body - in most regions, the SMAC (Servicio de Mediación, Arbitraje y Conciliación) or its regional equivalent. This step is mandatory under the Ley Reguladora de la Jurisdicción Social (Law 36/2011), and failure to comply results in the claim being inadmissible. The conciliation appointment is typically scheduled within 15 to 30 working days of filing.

If conciliation fails, the claim proceeds to the Social Court of First Instance. Dismissal claims have a strict limitation period of 20 working days from the date of dismissal - one of the shortest limitation periods in Spanish civil and labour law. Missing this deadline extinguishes the right to challenge the dismissal entirely, regardless of the merits. Claims for unpaid wages have a one-year limitation period under Article 59 of the Estatuto de los Trabajadores.

The Labour Inspectorate (Inspección de Trabajo y Seguridad Social) has broad powers to audit employers, access premises, review documentation, and impose fines. Infringements are classified as minor, serious, or very serious under the Law on Infringements and Sanctions in the Social Order (Ley sobre Infracciones y Sanciones en el Orden Social, LISOS). Very serious infringements - such as failure to conduct an ERE when required, or dismissal of a protected worker - carry fines at the upper end of the scale, and repeated infringements can result in exclusion from public subsidies and contracts.

The Fondo de Garantía Salarial (FOGASA) is the state body that guarantees payment of certain wage and severance claims when an employer becomes insolvent. FOGASA covers unpaid wages up to a statutory ceiling and severance up to a capped amount per year of service. For international businesses, understanding FOGASA';s role is relevant when assessing the risk profile of Spanish employment obligations in insolvency scenarios.

Appeals from Social Court decisions go to the High Courts of Justice of the Autonomous Communities (Tribunales Superiores de Justicia), and further to the Supreme Court (Tribunal Supremo) on points of law. The Supreme Court';s doctrine on employment matters - particularly on dismissal, collective bargaining, and working conditions - is binding on lower courts and shapes the practical outcome of disputes.

A loss caused by incorrect dismissal strategy can be substantial. An employer who dismisses a worker for disciplinary reasons without adequate documentary evidence, and who then faces an unfair dismissal ruling, must pay 33 days per year of service plus all accrued entitlements, and may also face a Labour Inspectorate fine if procedural violations are identified. The combined cost of a poorly managed dismissal of a senior employee with ten or more years of service can reach the low tens of thousands of euros, excluding legal fees.

The risk of inaction is also concrete: an employer who fails to challenge a worker';s claim within the applicable limitation period loses the right to contest it. Similarly, a company that delays registering a new employee with social security accumulates daily surcharges and interest that compound quickly.

To receive a checklist on employment dispute resolution and Labour Inspectorate compliance in Spain, send a request to info@vlolawfirm.com.

---

What is the biggest practical risk for a foreign employer dismissing an employee in Spain?

The most significant risk is procedural non-compliance converting a potentially valid dismissal into an unfair or null dismissal. Spanish courts apply a strict formal analysis: if the dismissal letter omits required factual detail, if severance is not paid simultaneously with an objective dismissal notice, or if the correct category of dismissal is not used, the dismissal is automatically classified as unfair. The financial consequence is severance at 33 days per year of service, capped at 24 monthly payments, plus all accrued entitlements. For null dismissal - for example, dismissing a pregnant employee - the consequence is mandatory reinstatement with full back pay and no financial cap. Foreign employers unfamiliar with these requirements frequently underestimate the total exposure.

How long does an employment dispute take to resolve in Spain, and what does it cost?

A first-instance Social Court hearing on a dismissal claim typically takes place between three and twelve months after the conciliation stage, depending on the court';s workload and the complexity of the case. If the case is appealed to the High Court of Justice, the total timeline can extend to two to three years. Legal fees for employment litigation in Spain generally start from the low thousands of euros for straightforward cases and increase significantly for complex collective disputes or cases involving multiple claims. The employer must also account for the cost of continuing to accrue liability during the litigation period if reinstatement is ultimately ordered, since back pay runs from the date of dismissal to the date of the final judgment.

When should a company use an ERE instead of individual objective dismissals in Spain?

A collective dismissal procedure (ERE) is legally required - not optional - when the number of dismissals within a 90-day period meets the thresholds in Article 51 of the Estatuto de los Trabajadores. Using individual objective dismissals to avoid the ERE thresholds, when the total numbers would trigger collective procedure, is treated by Spanish courts as a fraudulent circumvention. The consequence is nullity of all individual dismissals, requiring reinstatement of all affected workers. An ERE is procedurally more burdensome - it requires a 30-day consultation period, engagement with employee representatives, and notification to the labour authority - but it provides legal certainty and a negotiated outcome. For companies with genuine economic grounds and a workforce above the threshold, an ERE is the legally correct and strategically safer route.

---

Spanish employment law imposes substantive obligations at every stage of the employment relationship - from contract formation through to termination and post-employment claims. The combination of statutory protections, mandatory collective agreements, strict dismissal procedures, and active Labour Inspectorate enforcement creates a compliance environment that requires careful planning, particularly for international businesses entering the Spanish market or restructuring existing operations. Understanding the applicable rules, identifying the correct procedures, and acting within the relevant time limits are the three practical pillars of effective employment law management in Spain.

Our law firm VLO Law Firms has experience supporting clients in Spain on employment law matters. We can assist with employment contract drafting and review, dismissal procedure compliance, collective bargaining analysis, work permit applications, and representation in Social Court proceedings. To receive a consultation, contact: info@vlolawfirm.com.