Contributions to Social Security for Contracts of Indefinite Duration in Spain

On March 1, 2014, the Official State Bulletin of Spain (BOE) published the Royal Legislative Decree 3/2014 of February 28 on urgent measures to promote employment and contracts of indefinite duration. The Decree approved a reduction in employer contributions for common contingencies to Social Security for all companies that enter into contracts of indefinite duration and maintain net employment for three years.

With this new legislation, businesses and those who are self-employed (regardless of size or workforce) that contract workers with an indefinite contract shall only contribute 100 Euros per month to Social Security for common contingencies for the first 24 months (all other contingencies remain as before). Businesses with fewer than 10 employees will benefit from an additional third year with a reduction equivalent to 50% of the business’ contributions for common contingencies.

The measure benefits both full-time and part-time contracts with retroactive effect as of February 25. In the latter case (part-time contracts), companies will pay 75 Euros per month for common contingencies when the day is at least equivalent to 75% of the day of a full-time worker and 50 Euros per month when the day is at least equivalent to 50% of the day of a full-time worker.

Requirements

• Recruitment involves net job creation (taking into consideration the 30 days before the new contract).
• Maintenance of employment levels with the new contract for three years (for which the coming dismissals or dismissals for objective reasons are not valid; only legally recognized unfair dismissals are valid).
• No unfair dismissal six months before the new contract (starting on February 25, and not including those before that date).

The following includes additional details about the approved Decree:

Beneficiaries of the Flat-Rate Contribution

All businesses, regardless of size, concerning all contracts of indefinite duration signed between February 25, 2014, and December 31, 2014, that create net employment, regardless of whether they are contracting for full-time or part-time employment.

Amount of the employer contribution for common contingencies:

The business’ contribution to Social Security for common contingencies will be reduced in contracts of indefinite duration by the following amounts:

• 100.-€ per month: where the employment is full-time
• 75.-€ per month: where the employment is part-time and when the workday is at least equivalent to 75% of the day of a comparable full-time worker
• 50.-€ per month: if the employment is part-time and when the workday is at least equivalent to 50% of the day of a comparable full-time worker.

Duration of the Price Reduction

Implementation of these reductions will occur over 24 months, calculated from the date of commencement of the contract, and requires formalizing in writing concerning those contracts signed between February 25, 2014, and December 31, 2014.

After 24 months, businesses that at the time of signing the contract to which the reduction applies have fewer than 10 workers are entitled to a reduction equivalent to 50% of the business’ contribution for common contingencies for workers hired indefinitely for the following 12 months.

Where the dates of sick leave of workers in the Social Security scheme do not correspond with the first or last day of the calendar month, the amount of the business’ contribution will reduce in proportion to the number of days that the employee has worked in a month.

For more information on contributions to Social Security for indefinite contracts in Spain,