Spain: New legislation to promote employment

In December 2014 the Spanish Government approved the Royal Decree-Law 16/2014, which regulates the Special Program for Employment Activation. The main aims of this legislation are to :

• facilitate increased employment rates through employment policies;
• encourage the employer's maintenance of employment contracts where business activity is interrupted by force majeure; and
• support the unemployed with economic aid equal to 80% of the monthly IPREM (minimum wage index) in force (2014: € 426) for six months.

The Royal Decree Law introduces an exemption from social security contributions for a company which maintains employment after the interruption of its business activity due to force majeure by adopting measures such as (i) suspension of contracts or (ii) working time reduction instead of dismissals. The exemption will apply for up to 12 months' suspension of contracts and will exempt the company from paying 100% of the company's social security contributions accrued by those employees. The company must commit to maintain 100% of the employments affected for one year after the end of the suspension period.

This program also contains a six month allowance in favour of long-term unemployed who meet certain requirements. If employees get a job while receiving this allowance, they could continue benefiting from such allowance (in addition to the payment of salary) for a maximum of five months, and the employer can deduct from the employees' salary payments the amount paid by the Government for that period.

Actions for employers

Employers may wish more proactively to consider hiring unemployed workers given they can now do so at a lower salary cost (due to the direct deduction of the public unemployment allowance) for a period.

Employers faced with an interruption to business activity due to force majeure should consider alternatives to dismissal, such as suspending employment contracts, given that they could benefit from an exemption from 100% of the contributions made to social security on behalf of suspended employees.