The Labour Reform, published by Royal Decree-Law 32/2021 dated December 28, 2021, has the essential purpose of reducing the level of precariousness and the high rate of temporary employment in the Spanish Labour market.
To this end, and to promote permanent contracts, various measures are implemented aimed at strengthening the legal limitations for the use of temporary contracts. Such measures are as follows:
1. Labour contracts will be presumed to be established for an indefinite period of time.
2. Temporary contracts may be used exclusively in two specific situations:
– Coverage of certain circumstances of production
– Substitution of employees.
3. Both modalities of temporary contracting indicated in the previous point must express in detail in their clauses the reason for their temporary duration and the specific circumstances that justify it, as well as its connection with the foreseeable duration.
4. The temporary contract for “specific work or service” is abolished.
5. The limitation to the succession of temporary contracts due to circumstances of production is intensified through the application of the 18/24 month rule.
6. The use of “short” temporary contracts (less than 30 days) is discouraged by applying a penalty to the company cost of Social Security contributions.
7. The amount in terms of fines regarding administrative sanctions for improper use of temporary contracts is increased significantly.
The main characteristics of the two temporary hiring modalities indicated above in point 2 are the following:
1. Temporary contract due to circumstances of production
There are two situations which justify the temporary contract:
a. Address occasional and unforeseeable increases in production and fluctuations in demand, which, even in the case of the normal activity of the company, generate a temporary mismatch between stable employment available and what is required to properly meet the needs of production. These fluctuations include those that derive from annual vacations.
In this case, the duration of the contract may not exceed 6 months, extendable to 12 months by collective agreement.
b. Cover occasional, foreseeable situations that have a short and clearly defined duration.
Companies can use this type of contract for a maximum of 90 non-continuous days in the calendar year.
2. Temporary replacement contract
This contract may be formalized in the following situations:
a. Substitution of an employee with reservation of their job position.
The provision of services by the substitute may begin before the absence of the substituted person occurs, with both employees (substitute and substituted) coinciding in the performance of duties for the time necessary to guarantee the proper transition , and, at most, for fifteen days.
b. Completing the reduced hours of another employee.
This option can only be used when said reduction in the substituted employee’s working day is covered by legally established or regulated causes in the collective agreement.
c. Temporarily cover a job position during the selection or promotion process for definitive coverage through a permanent contract.
In this case, the contract may not exceed 3 months (or the shorter duration established by the collective agreement). Nor can a new substitution contract be signed once this maximum duration has been exceeded.
Additionally, the regulation establishes three complementary measures to restrict the use of temporary contracts. These measures are:
1. Limitation to the succession of temporary contracts due to circumstances of production
Those employees who, in a period of 24 months, have been contracted for a period of more than 18 months for the same or a different job position with the same company or group, through two or more labour contracts due to circumstances of production, either directly or through ETT, will be considered as permanent staff. Before this Labour Reform, the applicable rule was 24/30 months (instead of 18/24 months).
2. Penalty regarding the Social Security contribution for temporary contracts of less than 30 days
Temporary contracts of less than 30 days will have an additional Social Security contribution by the company, which must be paid at the end of said contract. Before this Labour Reform, the penalty was applied to contracts of less than 5 days (not less than 30 days).
3. Tightening of the administrative sanctions applicable for improper use of temporary contracts
The applicable penalty may range between 1.000 € and 10.000 € for each employee.
Finally, regarding the date of entry into force of these measures, the regulation establishes the following:
1. General rule: the new regulation of temporary contracts will be applicable from 30/03/2022, that is, 3 months after its publication.
2. Transitional regime: the previous regulation will be applied in the following cases:
a. Temporary contracts concluded prior to 31/12/2021: the previous regulation will be maintained until such contracts complete their maximum duration.
b. Temporary contracts signed from 31/12/2021 to 30/03/2022: the previous regulation will be maintained for 6 months from its signing.
