Fewer temporary contracts among key changes in Spain’s new labor market regulations

Spain’s Congress has approved on Thursday the new labor market regulation in force since December 29, 2021. The bill will limit temporary contracts and increase fines to companies using them in a fraudulent way. 

The new labor market regulation came into force after approval by the Spanish socialist and anti-austerity cabinet last year. Spain’s law required the norm to be ratified by the chamber. If it had not received enough support from political forces, the law would have been scrapped and the country would have returned to the 2012 labor market regulation.

As opposed to the previous bill, there has been an agreement between labor unions, businesses, and the government. Back in 2012, the People’s Party had an absolute majority so they passed the bill with no opposition. 

The new regulation is part of Spain’s recovery plan as it has to modernize the labor market if the country wants to receive future European funds. 

Key elements of the new labor market regulation

Limiting temporary contracts

The main goal of the reform is to fight the elevated number of temporary contracts in Spain’s labor market, one of the highest figures in Europe. To force the change, the law will reduce the contract types pushing new employees to become permanent. The so-called contractes d'obra i servei (work and service contracts), those linked to a specific project and the length of it, will disappear. 

Those who have been working with a temporary contract in the same position for 18 months in the last two years, will also become permanent workers. 

To promote compliance, the government has increased from €7,500 to €10,000 the fine for companies hiring a worker out of the law. 

Occasional fixed-term contracts

The new labor market regulation will allow temporary employees on an occasional basis. 

They will only be allowed in case someone has to replace a worker or there is a spontaneous need for extra labor. If the requirement is unexpected, the company is allowed to hire someone just for six months, and up to one year. However, if the business is aware and is planning ahead, they will be limited to hiring for a maximum of 90 days. 

Businesses will be allowed to still contract people based on the 2012 regulation until the end of March, or if it is an ‘obra i servei’ contract it will be allowed for the next six months.

Permanent seasonal contracts

The Spanish government wants to reduce precarious contracts for those jobs linked to periods such as winter or summer. To do so, they are promoting permanent seasonal contracts that will count from day one and not only the weeks or months worked. 

Non-expirable agreements

The new labor market regulation recovers the non-expirable agreements between unions and companies. These agreements between both parties set the labor rights and conditions in the company or the overall sector. 

The deals will not expire and will only change once there is an agreement between both parties. If a deal is not possible, the pre-agreed sectorconvention will prevail. 

Until now, with the 2012 regulation, these agreements had a one-year validity period. So, after this time, companies and unions had to negotiate again, and some workers said that businesses would allow the deal to expire so companies could worsen the conditions.