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WORKING IN SPAIN

Everything you need to know if you lose your job in Spain

Losing your job can be tough at the best of times, but losing it abroad can be even tougher. Here's everything you need to know about losing your job in Spain and what you can do next.

Everything you need to know if you lose your job in Spain
Everything you need to know if you lose your job in Spain. Photo: Johnny Cohen / Unsplash

It’s a situation nobody wants to find themselves in, but can happen to anyone.

Losing a job can be stressful enough in your own country and native language, let alone abroad and in a foreign language. If this happens to you, there’ll likely be a never ending series of worries: what does this mean for my residency or VISA? How will I pay rent? hat if I think I was unfairly dismissed?

These are just a few examples of the types of worries that will likely be going through your mind if you lose your job, and knowing what to do next, the options available to you in Spain, and how to be go about them can really give you an advantage and help you bounce back.

Getting your head around Spanish system of redundancy pay, for example, or how to claim unemployment benefits and generally knowing your rights, can be a bit daunting.

Fortunately, The Local has put together all the information you’ll need in the event that you lose your job in Spain.

Types of dismissal 

In Spain, companies can generally carry out three types of dismissals: objetivo (the worker has no blame), disciplinario (the worker is at fault) and colectivo (objective dismissal of a significant number of workers).

However, if you (the employee) don’t agree with the reasons for being let go, you are within your legal rights by Spanish law to raise the matter with a judge to determine whether their dismissal was justified (procedente) or wrongful (improcedente).

READ ALSO: How much severance pay will I get if I’m sacked in Spain

Am I eligible for redundancy or compensation pay?

If you lose your job in Spain, you’ll need to know about redundancy payments (el finiquito) which everyone is entitled to, and any possible compensation payments (indemnización por despido) that depend on a variety of factors such as seniority, salary and the reason why the work relationship ended. 

El finiquito

In Spain, el finiquito refers to the financial settlement an employee receives when their contract is finalised.

This redundancy pay, often accompanied by an official dismissal letter stating the end of a worker’s contract, is a lump sum of money that a company must pay to an employee.

El finiquito is always paid when you lose your job, but how much you are paid depends on various factors, including how much salary you have outstanding, how many days you’ve worked that month, and any unused holiday days you have accrued.

El finiquito can include compensation payment, which depends on whether the employee was fired and the type of dismissal. 

Compensation pay (Indemnización por despido) 

Though the vast majority of contract workers are entitled to redundancy pay, you may also qualify for compensation payment, known in Spain as indemnización por despido.

However, unlike a redundancy payment that is uniform and everyone receives, for compensation there are some other key factors that determine if and how much you could be entitled to.

Annual salary – including overtime payments, commissions, bonuses and other supplements, the average year of overtime, productivity pay and other bonuses such a car or house owned by the employer. Tax allowances, cash tips and social security contributions are exempt from calculations.

Seniority – The number of months and years you’ve worked for the company. Generally speaking, if you’re fired without being at fault you’re entitled to 20 days of wages for every year you worked for the company, with the lump sum limit set at 12 monthly wage payments. For wrongful dismissals, this amount can be 33 days for every year worked (a lump sum limit of 24 monthly payments) and forjob contracts signed before 2012 it is 45 days of wages for every year worked (a maximum of 42 monthly wages).  

Type of contract termination – was it voluntary redundancy? Non-voluntary? Were you sacked for inappropriate behaviour? When a sacking is considered just or appropriate, there is no right to compensation, but you will still receive the redundancy payment. How exactly you were sacked can determine your compensation claim as only workers with despidos objetivos and improcedentes have the right to claim this type of compensation.

So for example, an employee who has worked for two years and three months for a company and has an annual gross salary of €14,000 is sacked and a labour court finds it was a wrongful dismissal. They were hired after 2012 so 33 days of wages correspond for every year worked (max 24 monthly payments). 

The calculation would be:

33 days x 2 years = 66 days

3 extra months = (33 x 3)/12 = 8.25 days

66 + 8.25 = 75 days of compensation pay

€14,000 gross annual salary/365 = €38.3 daily wages

€38.3 daily wages x 75 days of compensation = €2,887.5 of compensation pay for unfair dismissal

Am I entitled to unemployment benefit?

In Spain, if you’re unemployed but willing and able to work, if you’ve been made redundant, or your regular working hours and/or salary have been cut by anything between 10 percent and 70 percent, you can apply for unemployment benefit in Spain.

READ ALSO: UPDATED: Spain approves new €600 per month unemployment benefit for artists

How much is it?

According to the Spanish government, “unemployment benefit is calculated according to the regulatory basis; this, is the average of the contribution bases of the last 180 days of work prior unemployment. The amount of unemployment benefit during the first 180 days will be 70 percent of the regulatory base, and from day 181 it will be 60 percent of that base.”

The exact amount you’re entitled to, based on that calculation, may not be lower than the minimum limit or higher than the maximum limit established by Spain’s IPREM – the index reference used to calculate state aid such as the minimum wage and unemployment benefits.

How much you’re entitled to also depends on other factors, such as if you care for dependent children.

IPREM

On December 24th, the Spanish government announced Law 31/2022 (you can read the official Official State Gazette here)  that set the monthly IPREM at €600.

Based on that, the minimum amount of unemployment benefit for 2023 will be €560 (without children) and €749 for this with dependent children. The maximum is €1,225 for people without children and €1,400 for people with one child, and €1,575 for people with more than one dependent child.

You can find more information about the minimum and maximum benefits here.

How do I apply?

If you are registered and have previously contributed to Spanish social security, you are entitled to contributory unemployment benefit: (protección por desempleo), which in Spain is given to the unemployed who have contributed to social security for a minimum of 360 days during the previous 6 years before they were made unemployed.

What requirements must you meet?

In order to qualify:

  • you must be registered with social security
  • be legally unemployed, officially and actively looking for work though Spain’s employment office (Servicio Público de Empleo Estatal, known as SEPE) and willing to accept suitable employment
  • have paid social security contributions for at least 360 days in the 6 years previous to becoming unemployed
  • be at least 16 and not yet have reached retirement age.

How do I apply and claim?

You can apply for unemployment benefits here.

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For members

FREELANCING

The help that self-employed in Spain can apply for in 2023

Anyone who is self-employed in Spain knows it's tough. Fortunately, there are several grants and benefits available to autónomos and small businesses this year to help you out.

The help that self-employed in Spain can apply for in 2023

There are 3,329,863 autónomos or self-employed people in Spain, but according to the Asociación de Trabajadores Autónomos, Spain’s self-employed union, more than 2 million self-employed workers (which is 63 percent of them) have an income that is below Spain’s Interprofessional Minimum Wage (SMI).

READ ALSO: Spain to raise minimum wage by 8 percent

With self-employed workers earning so little and having to pay very high monthly social security payments, which go down €200 a month for lower earners and progressively higher – up to €590 a month for higher earners, many may be forced to look for support where they can. 

What benefits and help are available?

Spain offers a whole host of benefits and help for self-employed people, including the following, which are all available this year.

Starting a new company

Grants of up €10,000 are available to people to help them launch a new business or company. The exact amount varies, and they are aimed at helping unemployed young people aged 30 years or younger, unemployed women, unemployed people with disabilities, and unemployed women with disabilities.

In the case of victims of gender violence, grants can be boosted by 10 percent.

Investment subsidies

There is also aid to help you finance investments. The subsidies work out equivalent to a 4 percent reduction on the interest rate set by the body or business that grants the loan, with the subsidy limit being a maximum of €10,000.

Training

If a self-employed person wishes to undertake some extra training to improve their business or career prospects, they can apply for aid that covers up to 75 percent of the cost up to a maximum of €3,000.

READ ALSO – REVEALED: Everything you need to know about applying for Spain’s digital nomad visa

Digitalisation 

The Spanish government also offers a so-called ‘Digital Kit’, which can be accessed through grants of up to €2,000 to help ‘digitalise’ a business to make it more competitive. These grants are intended for things such as creating a website or e-commerce platform, managing social networks, installing cybersecurity or upgrading systems.

The ‘zero quota’

As many of you probably already know, in Spain self-employed people not only pay quarterly income tax (IRPF in Spain) but must also pay a monthly social security payment. You can read all about that and upcoming changes to the system here, but note that some regions offer to waive this fee in order to promote entrepreneurism.

READ ALSO: New self-employed workers in Madrid to pay no social security tax

Madrid, Andalusia and Murcia all do, and the Balearic Islands will do it for self-employed people under 35 and for women entrepreneurs. These grants effectively mean the region picks up the tab for your monthly fee. It is available for one year and extendable by another 12 months if the recipient’s net income is lower than the SMI.

Minimum Vital Income

Since January, the number of self-employed people who can access the Minimum Vital Income has also increased. This benefit is compatible with income from self-employment and has also been increased. If you qualify, you could get an extra €565.37 per month for a single person without kids and more if you have children. You can find out more about it here

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