Spain: Publication of the new system on incentives for employment contracts
Spain Labor and Employment Law Alert
The law introduces the requirements and conditions on reductions in social security contributions and incentives for hiring, among other issues.
January 11, 2023 saw the publication in the Official State Gazette of Royal Decree-law 1/2023, of January 10, 2023 on urgent measures on incentives for employment contracts and the improvement of welfare coverage for entertainers .
The new law aims to regulate incentives intended to promoting employment contracts, as well as other programs or measures to boost and maintain stable and quality employment financed by means of reductions in Social Security contributions and other joint collection items or developed through employment support instruments.
Although the requirements and conditions of each measure are regulated extensively in the new law, we summarize below the principal developments and aspects of interest.
Regarding the general conditions of the measures:
- The law regulates the requirements to be a beneficiary, very briefly: not having been disqualified from obtaining subsidies and public aid, or excluded from access to aid, subsidies, reductions in Social Security contributions and benefits, being up to date with tax obligations, being up to date with Social Security obligations or corresponding having an equality plan, in the case of those companies obliged to implement it (which will be understood to be fulfilled with the mandatory registration of the plan in the public registry).
- In the case of reductions in contributions for permanent employment contracts, including the transformation of contracts provided for in the regulation, and for the incorporation, on an indefinite basis, as worker or worker-members in cooperatives and worker-owned companies, the beneficiary must maintain the recipient of the measure registered with the social security system or treat him/her as being registered with the social security system, with the obligation to pay contributions for at least three years from the date of commencement of the subsidized contract, transformation or incorporation.
The law sets out a list of grounds for termination in which, for the purposes of compliance with these obligations, terminations of contracts will not be borne in mind. These include dismissals on objective or disciplinary grounds that have not been declared or recognized as unfair, collective layoffs that have not been declared unlawful, expiration of the agreed term in the case of training or fixed-term contracts or terminations on reaching the end of work periods in cases of workers with permanent-discontinuous contracts.
Failure to comply with the obligation to maintain the worker registered with the Social Security system will result in the loss of the entitlement to the benefits and the obligation to reimburse under the terms set out in the law.
- Regarding exclusions, the hiring incentives will not apply in a number of cases, such as hiring employees who in the previous twelve months had provided services in the same company under a permanent contract (or in the last six months under a fixed-term or a training contract) or workers who have left under a permanent contract for another employer within the previous three months or workers who have left under a permanent contract for another employer within the previous three (unless the termination of the contract was due to a dismissal that was recognized or declared as unfair, or due to a collective dismissal).
Likewise, companies that have terminated or terminate contracts that have received incentives due to a dismissal that was acknowledged or declared unfair will be excluded for a period of twelve months from the hiring incentives (this period starts to run from the date the dismissal is acknowledged or declared unjustified or from the termination arising from the collective layoff). The aforementioned exclusion will affect a number of contracts equal to the number of terminations that have occurred. The control or verification mechanisms of the objective requirements to access and maintain the reductions in Social Security contributions are also established.
The law sets forth the conditions, requirements, amounts and periods of eligibility for the measures. The main measures are as follows:
- Reductions in Social Security contributions for the implementation of work-linked training contracts, for the conversion of training and relief contracts into indefinite-term contracts, for hiring individuals under indefinite-term contracts or for taking on individuals who carry out practical training at companies as members in cooperatives or worker-owned companies, for work-linked training contracts or for hiring research personnel under predoctoral contracts.
- Reductions in Social Security contributions to replace workers in certain scenarios with unemployed individuals, for paying contributions for workers that have been replaced during the birth and care of a minor, for shared responsibility for infant care, risk during pregnancy and natural breastfeeding, in cases of changes in job position due to risk during pregnancy or breastfeeding and in cases of occupational diseases or for hiring women who are victims of gender violence, sexual violence, human trafficking and sexual or workplace exploitation.
- Other scenarios envisaged in the new law are reductions in Social sScurity contributions for hiring individuals with borderline intellectual impairment, employees reinstated after leaving the company due to permanent disability, for the indefinite-term hiring of people in a situation of social exclusion and the long-term unemployed, or for the transformation of temporary contracts in the agricultural regime into permanent-discontinuous contracts, among others.
The law also provides for other instruments to support employment, such as the possibility of collective bargaining including commitments to maintain or increase employment, the conversion of training or relief contracts into indefinite-term contracts or the improvement of indefinite-term employment, or of the Government to establish measures to encourage the voluntary implementation of equality plans.
The additional provisions also include other scenarios in which reductions in Social Security contributions will be given, such as for the indefinite-term hiring young people that are beneficiaries of the National Youth Guarantee System, for hiring people with disabilities, or reductions in employer’s Social Security contributions for research personnel.
Other relevant new features of the law areas follow:
- Amendments are made to Articles 16, 138 and 139 of the General Social Security to include the powers of ex officio review corresponding to the social security authorities in connection with classification decisions in the event of breaches of the statutory requirements in this regard. This new regulation avoids the breaches of classification decisions being transferred to the social jurisdiction and remains in the jurisdiction competent to hear this matter, the contentious-administrative jurisdiction.
- The obligation to repay aid for relocation is envisaged in the case of companies that relocate their industrial, production or business activity to territories that are not part of the European Union or of the signatory States of the Agreement on the European Economic Area. In this case, all of the Social Security contributions paid during the four years immediately prior to the relocation and the subsidies received must be refunded.
- The new law determines which scenarios applicable to contribution-related benefits for temporary layoff procedures and the RED mechanism are linked to training.
- It also includes improvements in the welfare coverage (social protection) for artists which we address in the Intellectual Property Alert that you can access here.
The new law will come into force on September 1, 2023, with some exceptions that are set out in its thirteenth final provisio n (such as the obligation to repay aid for relocation, the ex officio review in the area of acts of framing due to non-compliance with legal requirement or contribution-related benefits for temporary layoff procedures and the RED mechanism).