Spain’s labour reform delivers jobs but at a cost

Spain's labour market reform has helped bring down sky-high unemployment but critics complain the bulk of the jobs it created offer lower salaries and less security.

Spain's labour reform delivers jobs but at a cost
Photo: stefanolunardi/Depositphotos
Without the 2012 law “we would not have dared to expand so quickly,” said Juan Martinez, the manager of a Kia car dealership in northern Madrid.
The reform drastically reduced the amount of compensation that must be paid when workers are let go and allows for collective dismissals, even when a firm is not facing economic difficulties.
It also created a new open-ended contract which can be used by small and medium-sized businesses which allows dismissals without justification during the first year of employment.
Prime Minister Mariano Rajoy's conservative government adopted the reform in 2012 after 2.6 million jobs had been lost following the 2008 global credit crisis, which hastened a correction already underway in Spain's key property sector.
It has been held up as an example of “flexicurity” — a cooperative approach to labour relations pioneered by Denmark in which employees accept a degree of flexibility in working arrangements — to be followed in France and other European nations.
“You have less obligations as a business and that allows you to have less worries about the future than before,” said Martinez.
A third of jobs in the car sales sector disappeared after 2008. Spain's car dealers association credits the reform with a recovery in employment in the sector.
When Martinez opened his Kia dealership in 2014, he hired several former colleagues like him who had bet let go from car dealerships during the crisis.
He recruited a total of around 30 people, roughly a third under the new open-ended contract which allows for dismissal without justification during the first year.
The workers were eventually given permanent contracts as car sales recovered along with the overall economy. Spain's economy, the eurozone's fourth largest, expanded by 3.2 percent last year, one of the fastest rates in Europe.
'Fire at less cost'
About ten percent of open-ended contracts in Spain now allow for dismissal without justification in the first year.
Unlike what happened at Martinez's dealership, half of these contracts are terminated after the one year trail period, according to a report by Spain's second largest union, the UGT.
This more flexible contract has not led to the disappearance of temporary contracts, which continue to represent over one fourth of all contracts, a record in the 28-nation European Union.
Francisco Alvarez, a 42-year-old salesman at a Peugeot dealership in northern Madrid, said he knows he will have to complete at least four short-term contracts of three months each before he will be offered a permanent contract.
“An open-ended contract is not worth the paper it is written on. If the company wants to let you go, they will fire you at less cost now,” he said.
Spain's left-wing opposition parties have vowed to scrap the reform, which the government credits for a sharp drop in unemployment.
Spain's jobless rate fell from a record 27.2 percent during the first quarter of 2013 to 18.7 percent during the first quarter of this year.
Work more, earn less
But while the reform was meant to provide “flexicurity”, the government has only focused on “flexibility” and has forgotten about the “security” portion, said Manuel Lago, an economist at Spain's largest trade union, the CCOO.
Denmark sought to attenuate the problems of globalisation by offering employers greater flexibility to let workers go but also gave workers greater security in the form of easy access to unemployment benefits and retraining programmes.
But the Spanish government has “made access to unemployment benefits more difficult and reduced the amount that is paid” as part of austerity measures, said Lago.
State spending on unemployment benefits has fallen from 33 billion euros ($36.7 billion) in 2010 to 19 billion euros last year, a drop that is only due in part to the decline in joblessness, he added.
Unions argue the reform has also caused salaries to fall, by favouring negotiations over pay within individual firms instead of collective agreements covering an entire sector.
Jose Gomez, a 27-year-old mechanic, lost his job with a major car brand in 2012. After two-and-a-half years he found a new job but at much lower salary.
He now earns 900 euros a month compared to 1,500 euros at his previous job — and works an hour more each day.
“What I earn with my wife today is the same as what I earned on my own before,” he said.
Since the law was passed many hotels have outsourced their housekeeping services to subcontractors who pay maids who clean rooms up to 40 percent less since they no longer have to respect collective agreements.
For members


Do I have to take most of my annual leave in August in Spain?

Many Spanish companies still expect their workers to take their holidays at specific times of the year, primarily in August, right in the height of summer when many hotels are fully booked. So what are your rights, are you obliged to take your vacation in one particular month?

Do I have to take most of my annual leave in August in Spain?

While it’s your right as an employee to be able to take holiday days, do you have to take them when your company wants you to take them, or are you able to choose and have more flexibility?

Despite August being one of the hottest months in Spain and the one month of the year when many official companies and offices shut up shop, not everyone necessarily wants to take their break at the same time as everyone else.

Taking your holidays in August means less availability in hotels, overcrowding and more expensive transport and accommodation. If you don’t have children who are off from school during the summer months, then you may wish to take your vacation days at another time of the year, when it’s less busy and cheaper.

To answer the question it’s important to know the details about what the law says about how paid time off is taken, requested, imposed, or granted.

What laws or regulations dictate the rules about paid holiday time?

There are three different sets of rules and regulations, which are responsible for regulating the laws on vacation time in Spain. 

Firstly, you need to look at the Spanish Workers’ Statute, which includes rights, duties and obligations applicable to all salaried workers in Spain.

Secondly, you need to be aware of the collective sector and/or company agreements, which may dictate the rules for a particular industry for example.

Thirdly, you need to look at the contract, which you signed with your employer when you started working for them. This sets out your individual circumstances and the rules you must abide by.   

Workers Statute

As a general rule, all employees are subject to the Workers’ Statute. Holidays are part of this and are the subject of article 38. These conditions can never be contradicted by individual companies and are set as a guaranteed minimum. 

The minimum number of holidays in Spain is 30 calendar days per year. This equals two and a half days per month worked, in the case of temporary contracts. The statute states that vacations must be taken between January 1st and December 31st in separate periods, but one of them must be for at least two weeks. They are always paid and cannot be exchanged for financial compensation.

The period when you can take them is set by a common agreement between the employer and the worker, in accordance with what is established in the collective agreements on annual vacation planning. If there is disagreement, the social jurisdiction is resorted to.

At a minimum, the company must offer vacation days at least two months before the beginning of the holiday period, so that the employee has time to organise and book.   

When the planned time to take vacations coincides with a temporary disability, pregnancy, or childbirth, you have the right to enjoy the vacations at another time, even after the calendar year is over.

Collective agreements on vacations  

Your sector’s collective agreements may also help to answer this question. These aim to improve upon the basic and general rights that are included in the Workers’ Statute. They seek to adapt the rules to each type of industry or company. They could, for example, set out extra vacation days, which are greater than the standard 30 calendar days. 

You will need to find out what your specific sector or company’s collective agreement is. There is a possibility that your sector or company has mandatory summer vacations for the month of August and in that case, you can choose vacation dates, but only within this month.

Your work contract 

Lastly, you will need to consult your individual contract which you signed with the company when you were hired.  As well as the minimum conditions set out in the Workers’ Statute, your contract sets out your particular agreement with your employer in terms of holiday duration, the work calendar and other details.

Therefore, you should state in your contract whether you have to take your holidays during August, or if you’re free to take them at other times of the year.

If after consulting these three sets of regulations and there are still in doubt or in disagreement with your company about vacations, such as having to take them during the month of August, you should consult a lawyer specialising in labor law. They should be able to give you an answer specific to your situation.  

Can I appeal or disagree and what are the consequences? 

To appeal or express disagreement with what is proposed by the company, there is a period of 20 business days from when the vacation schedule is sent out, after which time you don’t have the right to show that you disagree.  

Companies can proceed to disciplinary dismissals due to abandonment of the job if you decide to take vacations that have not been granted or agreed upon with your employer. To avoid this type of problem, always make sure you have a record in writing of your request for vacation time and subsequent approval by the company.