CONTRACT OF EMPLOYMENT

Spanish employees now have an affluent lifestyle compared to their parents in the ‘Years of Hunger’ They enjoy high salaries (particularly executives and senior managers) and good working conditions. Women have professional and wage equality with men, although they still fill most low-paid jobs. Employment security has been eroded in recent years with an increasing number of workers employed on short-term contracts giving some flexibility in the labour market. Some low-paid people hold down two jobs, rather like their civil service forefathers in the 1960s.

Although employment conditions vary throughout Europe the main area for comparison lies in salary level, fringe benefits and job security. Spanish employees are near the bottom of the European earnings league but good fringe benefits, lots of holidays, job security and strong protection under dismissal legislation are undoubted plus factors.

Spain has lost more production days due to strikes in the last 15 years than any other country in the EU. Contrary to the UK. the government can enforce an imposed settlement if a strike impairs public services or disrupts important sectors of the economy. Employees are guaranteed the right to strike under law and cannot be dismissed for striking.

The contract

Employees in Spain, like other parts of Europe, have an employment contract (contrato de trabajo), stating details such as job title, salary, working hours, fringe benefits and terms of employment. There are three types of employment contract:

• An indefinite term contract.
• A short-term temporary contract for a specific duration and reason. For example a contract for a specific project or service, or for six months to deal with peak demand, or to substitute for another employee entitled to return to work.
• A verbal or written contract for casual or seasonal work which has few legal rights.

All employment contracts are subject to Spanish labour law and references may be made to other regulations such as collective agreements. Anything in a contract contrary to the statutory provisions and unfavorable to an employee is deemed to be null and void. If there is no written contract, the law assumes a verbal agreement is for one year. At the end of that year, or at any other time, the employer can dismiss the worker, giving at least seven days ‘notice and paying seven days’ salary for each full year worked.

Salary

A salary is stated in the employment contract together with any salary reviews, planned increases and cost of living reviews. Salaries can be paid weekly, fortnightly or monthly, by cash or into a bank account. A pay slip itemising salary and deductions is issued. Spain has a minimum wage. At around 3ε per hour it is a meaningless figure in the labour market, useful only to trade unions seeking a marker for annual wage increases.

Extra Months’ salary and bonuses

Employers in Spain pay their employees two extra months’ salary –one in July before the annual summer holiday and the other in December -which are intended to ensure that employees have extra money for their summer and Christmas holidays. Taking statutory, local fiesta days and annual holidays into account Spanish employees get 14 months ‘salary for 10 months’ work.

Working hours

The standard working week in Spain is 40 hours. The average with overtime is around 42 hours. Working hours vary dependant on the type of work and the time of year. The standard working day is from 9.30 to 13.30 and from 16.30 until 20.30; although from June and September it may be continuous from 7.00 to 15.00 with a short break for lunch. In line with their European counterparts many companies now operate from 8.30 or 9.00 to 17.30 or 18.00. There are no scheduled coffee breaks but it’s common for office workers in a town or city to pop out for breakfast or a cup of coffee, twice a day during business hours.

Overtime

Overtime is not compulsory and cannot exceed 80 hours a year. It must be paid at a premium of not less than 40% of the normal hourly rate and 100% for Sunday and statutory holidays. Employees are not obliged to work on Sundays unless a collective agreement states otherwise, although when an employee agrees to work on a Sunday, normal overtime rates are applicable. Overtime may be compensated for by time off rather than extra pay, providing there is a written agreement to that effect.

Social security

All employers and their employees, including foreign, temporary and permanent employees, must contribute to the Spanish social security system (seguridad social). Social security for employees covers health care (including sickness and maternity leave), injuries at work, unemployment insurance, retirement benefit, invalidity and death benefit. Pension benefit starts only after 15 years’ contribution. Unemployment benefit is paid if someone has worked for at least one year during the last six years and has registered with the INEM within 15 days of unemployment.

There are special social security programmes for agricultural workers, seamen, self-employed workers, civil servants and military personnel, coal miners and students. For everybody else there is a general social security programme where people are classified under a number of professional categories in order to determine their social security contribution. Payment is based on a nomina, the official salary for a classification of work with the employee’s contribution deducted at source by the employer. Social security contributions by the employee are around 5% and the employer 23%.

Spain has treaty agreements with other countries ensuring someone who has worked in two or more countries does not retire with a pension deficit. These agreements ensure the total number of years paid into social security systems in the various countries are added together to enable the employee to qualify for a pension which is paid proportionally by each country.

Public holidays

The government allows 14 national and local public holidays a year. Of these, two are regional or municipal holidays celebrating dates of local importance. All public offices, banks and post offices are closed on public holidays. In addition most regions and towns have their own carnival and fiesta days.

Annual holidays

Under law a full-time employee is entitled to a minimum of 23 working days (one month) paid annual holiday. When both annual and public holidays are taken into account Spain has the greatest number of holidays of any EU country. August is the traditional month for summer holidays with many businesses closing down entirely. Some businesses close for two weeks over Christmas and New Year, and many restaurants in holiday areas close for the month of February.

Dismissal and redundancy

In addition to reasons such as mutual agreement, death, expiration of the contractual term and retirement, an employment contract can be terminated for technological and economic reasons and for objective or disciplinary reasons.

An employee can be made redundant on technological and economic grounds only in relation to the collective restructuring of a company’s workforce. Technological and economic causes are legally defined terms when the employer may decide dismissal unilaterally. Termination of employment due to redundancy attracts generous compensation. Eight days’ pay for each year worked under temporary contracts and 33 days’ pay per year for indefinite term contracts. If a company goes bankrupt, employees are entitled to 20 days’ pay for each year of service.

Objective reasons for dismissal include employee ineptitude and an inability to adapt to technological change. Legal grounds for dismissal for disciplinary reasons include insubordination or disobedience, repeated absenteeism or lateness, physical or verbal abuse, fraud, disloyalty, poor performance, working for a third party without the consent of the employer and habitual drug or alcohol abuse.

An employee dismissed for objective or disciplinary reasons may challenge the decision in the labour courts. Equally an employee can leave and seek compensation if they feel an employer has not held to the terms of a contract. Disputes about these matters are taken to the Magistratura de Trabajo, the labour court, who will arbitrate and make judgment accordingly.

BLACK ECONOMY

Illegal working is common in Spain and neighbouring Morocco. The black economy (economia sumergida) accounts for a significant proportion of the country’s generated wealth. What causes this situation?

• Influxes of illegal Moroccan immigrants seeking to better themselves in Spain are keen to accept low cash payments for unskilled work. It is illegal for non-EU nationals, such as Moroccans, to work in Spain without a work permit (the application is made by the employer). Unscrupulous employers bypass this procedure and use this labour, paying low wages for long hours in poor working conditions. This occurs in industries traditionally employing casual labour such as building, farming and food services.
• Illegal working avoids payment of additional costs (particularly social security and IVA (VAT) payments). This can make the difference between a fair product price and one too expensive or the difference between profit and loss.
• Many casual, seasonal workers (or indeed full time workers) choose to work illegally. They do not pay tax or social security contributions, and while there is no entitlement to state benefits for work injury, health care, unemployment benefit or pension, this is viewed as a small penalty for failure to pay social security contributions.