When engaging the workforce how does the law distinguish between different categories of employment status?
In general terms, the law distinguishes between three different employment statuses with different regulations: 1) Employed person, 2) Senior management personnel and 3) Self-employed.
Employed person (salaried workers):
The definition of an employee is given in the Spanish Workers' Statute (Royal Legislative Decree 2/2015, of 23 October). In this regard, it should be noted that in Spain the words employees and workers are often used interchangeably, since the difference with other employment statuses is marked by the provision of services as an employed person irrespective of the employer. However, within the Workers' Statute, other subgroups are also regulated: i) workers made available through a temporary employment agency after a specific contract has been formalised between the company and the temporary employment agency, ii) subcontracting part of the activity to be carried out by an external company.
Special senior management relationship.
Regulated in the Royal Decree 1382/1985 of 1 August 1985, this is a special relationship halfway between the ordinary employment relationship and mercantile contracting. These are those positions in the management and administration of the company, which, without being considered as a commercial relationship, because they do not have effective control in the company, or do not have more than 25% of the shares of the company, and depend on and reports directly to the Board of Directors.
This category is regulated by the Spanish Civil Code (Royal Decree of 24 July 1889) and the Law 20/2007, of 11 July, on the Statute of Self-Employment. It should be noted that there is the figure of an economically dependent self-employed worker, who is the one who invoices at least 75% to the same client.
What are the different rights and protections for each employment status?
We will focus on the following main issues:
- Wages. The employees are entitled to receive a salary according to their roles in the company and the business activity, based on what is established in the applicable Collective Bargaining Agreement, always granting at least the Spanish Minimum Interprofessional Salary (SMI in Spanish). The Senior Management may agree their wages in the contract, granting at least the SMI.
Working conditions. The various CBA that apply will establish working conditions as an improvement of the conditions laid down in the Spanish Statute, such as holidays, paid leaves, and others.
- Health protection. All of them have Public Health care covered as they are contributing to the corresponding Social Security Scheme.
- Social security benefits. This is where the differences lie, as the benefits are linked to the contributions made, and while in the general scheme the contribution is made on the basis of the salary received. For the specific scheme for the self-employed, the contributions are not linked to the self-employed's income, but are chosen by the self-employed between minimum and maximum bases, which means that normally, in order to save costs, contributions are made on the minimum base, causing the benefits to be received in the future to be low.
- Unemployment benefit. Employees are covered for this contingency as there are compulsory contributions, so they are entitled to unemployment benefits in general terms as long as they meet the requirements for accrual. Senior managers are not (with certain exceptions) because they do not pay unemployment contributions and neither do self-employed workers, unless they are making a specific contribution that entitles them to receive a benefit for inactivity which duration will vary according to the time of contributions made for this purpose.
- Compensation in the event of termination of the contract. In the case of both salaried employees and senior management, certain indemnities are established in the event of dismissal or irregular termination of the contract.
What are the current themes with regard to employment status?
Currently in Spain, as a result of the entry into force of the new types of employment contracts following the labour reform approved by the government through Royal Decree-Law 32/2021, of 28 December, on urgent measures for labour reform, the guarantee of employment stability and the transformation of the labour market, the most topical issues are linked to the changes in the types of contracts to be made when hiring employees. Temporary contracts and some of their typical contracts have been eliminated and/or modified, which currently generates insecurity to the company so they need advice tailored to their specific circumstances.
Authored by Olga Cornejo