The keys to the new labour market reform

The BOE of 30/12/2021 has published Royal Decree Law 32/2021, of 28 December, which includes a compilation of urgent measures for labour reform, the guarantee of employment stability and the transformation of the labour market.
 Among the labour-related measures, the following stand out:
  1. The modalities of contracting are reduced. The contract for work or service disappears, and new measures on the concatenation of temporary contracts are applied. Contribution costs for temporary contracts are increased.
  2. Training contract with two modalities.
  3. Modification of the fixed-term contract.
  4. Measures to modernise collective bargaining. Collective agreements.
  5. Red-New ERTE mechanisms. Internal flexibility measures.

1. Temporary contracts:

The main focus of the present reform is to reduce staff turnover and the rate of temporary employment; that is why the modalities of employment contracts are simplified and rearranged, giving more emphasis to permanent contracts and redesigning temporary contracts.

  • The ordinary employment contract will be indefinite and temporary contracts may only be made for very specific and justified reasons.
  • The possibility of concluding contracts for specific works or services disappears.
  • Fixed-term employment contracts may only be signed due to production circumstances, as long as there is a cause that justifies the temporary nature of the contract, which is why the specific circumstances and their duration must be precisely identified and specified in the contract, excluding those circumstances that constitute the company's usual and ordinary activity.
Temporary contracts may be carried out in the following situations:
 1. Occasional and unforeseeable increases, as well as oscillations that generate a temporary mismatch in the available occupation. In these cases, the contract may not exceed 6 months, 12 if permitted by the collective agreement.
 2. To deal with occasional, foreseeable situations that have a short and limited duration. This contract may be used for a maximum of 90 days per year. These 90 days may not be used continuously.
 3. To replace workers with the right to reserve their job, reduction of a worker's working day, selection process, holidays… The performance of work within the framework of contracts, subcontracts, or administrative concessions that constitute the company's usual or ordinary activity may not be used as a reason for this contracting, except in the case of real production circumstances.
Workers who have been contracted, with or without interruption, for more than 18 months during a period of 24 months will acquire the status of permanent employees. As a major novelty, the amendment amends that they will have the status of permanent employees if they cover a job that has already been filled, even if it is by another worker, including contracts for the provision of temporary employment carried out by temporary employment agencies.
The regulation will come into force three months after its publication, which means that companies will have until 30 March to adapt.
Contracts for work or service, and temporary contracts due to production circumstances entered into from 31 December 2021, and until 30 March 2022, will be governed by the legal or conventional rule in force on the date on which they are entered into, and their duration may not exceed 6 months.
  • An additional contribution to be paid by the employer for fixed-term contracts of less than 30 days will be calculated by multiplying by 3 the contribution resulting from applying the minimum daily base of group 8 of the General Social Security Scheme. This additional cost will not be applied to employed agricultural workers or to employees/employees in the home, or in substitution contracts.
  • The interim contract is maintained, for the replacement of a worker with the right to reserve the job, as long as the name of the person being replaced and the reason for the replacement are specified in the contract. In cases in which this type of contract is concluded to cover a post during the selection or promotion process, the maximum duration may not exceed 3 months (90 days).
Workers in the construction sector will also have a permanent contract and, when the work where they are employed comes to an end, the company will have to replace the worker.

2. Training contracts.

There will be two types of training contracts:
1.Training in alternation with paid work. The training contract is limited to young people up to 30 years of age. The minimum duration will be between 3 months and 2 years (new art. 11.2 of the TE). Working hours shall not exceed 65% in the first year and 85% in the second year and no overtime, shift work or night work is allowed. Limited for a period of between 3 and 24 months (new art. 11.2 TE). Never less than the minimum interprofessional wage.
2. Training in alternation to obtain professional practice. The alternating training contract aims to respond to the acquisition of the professional competence corresponding to a certain level of studies. It is limited to a period of between 6 and 12 months and may be used only during the 3 years following the completion of studies (new art. 11.3 TE), except for people with disabilities.
3. Within 6 months of the publication of this Royal Decree, the Statute of the Scholarship Holder will be drafted.

3. Modification of fixed-term, discontinuous contracts.

This contractual modality is strengthened by indicating that it may be used for all those indefinite but intermittent needs, whether for the performance of work that has certain, determined or indeterminate periods of execution.
The permanent-discontinuous contract may be signed within the framework of commercial or administrative contracts which, although foreseeable, form part of the company's normal and ordinary activity.
This type of contract must have the duration of the period of activity, the working day and the distribution of working hours defined, even though it may be an estimated duration at the time of the call.
When permanent-discontinuous hiring is justified for the conclusion of contracts, subcontracts, or on the occasion of administrative concessions, the periods of activity may only occur as a waiting period for relocation between subcontracts, i.e. the agreements may determine a maximum period of inactivity between subcontracts.
Their seniority will be calculated taking into account the entire duration of the employment relationship, and not only the actual work as at present.

4. Modernisation of collective bargaining. Collective agreements.

  • The company agreement prevails over the sectoral agreement, taken out in the regulation of wages and their supplements (Article 84ET). It will no longer be possible for a company agreement to have a lower wage than the sectoral agreement.
  • The "despenjament salarial" will continue to exist, which means that wages cannot be lower than those of the sectoral agreement.
  • Collective agreements will recover their indefinite ultra-activity, meaning that once a collective agreement has been denounced and a year has passed, it will not lose its validity.

5. Network Mechanisms – New ERTE

  • One of the most striking aspects of the labour reform are the new ERTE models. New internal flexibility mechanisms are introduced, with exemptions from Social Security contributions and incentives for training, as an alternative to temporary employment and to reduce redundancies in times of crisis or reconversion, following the model used during the pandemic.
  • ERTEs are boosted with exemptions of 90% for all cases of force majeure and 20% for ERTEs called ETOP, those linked to economic, technical, organisational and production causes, which will be linked to training (D:A: 25° of the TE).
  • With this new labour law, temporary lay-offs will be strengthened in order to avoid collective redundancies. These new model of ERTE, which are called 'Mecanismo RED', will be broken down according to two modalities:
1.- Cyclical: When the application of additional stabilisation measures is advisable due to cyclical and macroeconomic issues, with a maximum duration of one year.
2.- Sectoral: When permanent changes are observed in a specific sector or sectors of activity that generate needs and processes of professional requalification of workers. It is established as a structural and differentiated cause of the ERTE due to force majeure the limitations of the normal development of the activity by decision of the competent authority. It will have a maximum duration of one year and the possibility of 2 extensions of 6 months each.

6. Retention of employment.

If companies do not comply with the requirement to maintain employment, they will be obliged to return all the exonerations of each worker whose contract has been terminated.


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