Under Spanish labor law, there are various ways that the employment relationship may end:
We will focus on the last two. As we mentioned, Spain is not a litigious country, except when it comes to employee dismissal. Judges tend to favor the employee, so it is important for the employer to do things right.
For all types of dismissal, the employer must deliver a letter of termination to the employee. This letter must include the date of termination and the reasons for the dismissal.
Objective dismissal (despido objetivo): Objective dismissal is normally due to economic reasons (the business is not doing well) or organizational reasons (closing departments or moving offices due to a merger or centralization or other type of re-organization).
Disciplinary dismissal (despido disciplinario): Grounds for disciplinary dismissal includes repeated lateness or absence, disobediance, verbal abuse, sexual misconduct, etc. In the termination letter, the reason must be explained in detail and should be justifiable, since this letter may later be used in court.
Unfair dismissal (despido improcedente): What if the employee just doesn't live up to company expectations? There is no company re-org nor are there grounds for disciplinary dismissal. In fact, even if there are strong grounds justifying objective dismissal or disciplinary dismissal, businesses will often use this type of dismissal for termination. It will cost the business more, but it helps to avoid litigation. If the employee contract is after February 12, 2012 and the dismissal is declared "unfair" (improcedente), the business can choose to either re-admit the employee or to pay the employee an indemnization of 33 days per year, up to a maximum of 24 months' payment.
Note that when you offer a permanent contact (contrato indefinido), the first months are considered a training period. If you fire an employee within that training period, there is no required compensation.
Final payments to the employee: There are two types of payments:
When an employee resigns or a temporary contract expires, there is generally no indemnization.
Steps in a termination:
Employees with special protections (despido nulo): Note that under Spanish law, certain employees have more protection. Among other groups, this includes:
Because of the protections for these employees, it may be very difficult to fire them. If the dismissal does not comply with the special regulations, the courts may deem the dismissal as void (despido nulo). In this case, the employer must reinstate the employee. To avoid reinstatement, a settlement is often reached between the lawyers.
This article does not constitute legal advice, it includes just the basic information. There are many special situations in the labor regulations in Spain that are not covered by this article. Labor law in Spain is very complicated. When you as an employer want to fire an employee, we always recommend that you first seek legal advice specific to the case.
Guide to hiring employees in Spain
Types of work contracts, with samples
Maternity and paternity leave in Spain
Guide to a Spanish payslip, with sample payslip
For foreign employees: the Ministry of Employment's guide to working in Spain