Permanent employment contract supporting entrepreneurs in Spain

Considering the Labor Reform of February 12, 2012, we can affirm that one of the greatest novelties in contracts for hiring employees is the creation of the Permanent Employment Contract Supporting Entrepreneurs.

This contract is for those businesses that have fewer than 50 employees when recruitment occurs. However, during the previous six months before forming the contract, if the business has taken improper extinctive decisions, covered jobs for the same professional category, same centre, or workplace centres, then the business cannot use this type of contract.

Drafters of these types of contracts form them according to the official model for a permanent and full-time period.

The minimum duration of the contract is three years, where the employer and employee can agree on a one-year trial period. If the employee has carried out the same activities in the business before the employer contracts the employee under this type of contract, a trial period cannot be a part of the contract.

The great novelty introduced and the greatest advantage that these types of contracts offer are their incentives — from tax advantages to bonuses in the employer’s contribution to Social Security.

Referring to the tax incentives, consider the following points

The business will have the right to a tax deduction of 3,000 euros for the first employee contracted provided that the employee is under 30 years old.

If the business employs an unemployed person who receives benefits, the business would have the right to a tax reduction of 50% on the following amounts:

  • The amount of unemployment benefit that the employee still had outstanding at the time of recruitment
  • The amount corresponding to 12 months of the unemployment benefits recognized
  • The employee should have received the unemployment benefits for at least three months
  • The business will require from the employee a certificate from the Public Employment Service of the amount of the benefit still outstanding
  • Each month, the recruited employee can voluntarily make compatible his or her salary with 25% of the amount of the benefit recognized and outstanding in the moment of initiating the contract. If the employee decides not to make these amounts compatible, the right to the benefit will remain under the same terms that currently occur. If gainful employment develops for a period of less than 12 months (one year), this event disturbs the right to the 25% of the amount of the benefit recognized and outstanding. However, the employee will have the ability to restart thereafter provided that he or she accredits his or her new legal situation of unemployment. Or, the right to the 25% of the amount of the benefit recognized and outstanding will be exhausted if the paid employment is equal to or greater than the time period indicated before.

Employees enrolled with the Employment Office will have bonuses in the employer’s contribution to Social Security for three years:

Two areas are distinguished:  the youth and those over 45 years old.

  • Youth: The scale of this category includes those persons between 16 and 30 years old, both of these ages inclusive.

The bonuses shall be the following:

Year 1 83,33 € /month 1,000.00 €/year
Year 2 91,67 €/month 1,100.00 €/year
Year 3 100,00 €/month 1,200.00 €/year
  • Those over 45 Years Old:

The bonuses will be 108.33 euros/month (1,300 euros/year).

These bonuses will be compatible with other forms of public assistance that have the same purpose, provided that the total of these applicable bonuses does not exceed 100% of the employer’s contribution to Social Security.

Lastly, and as we have previously mentioned, the employee must remain employed for at least three years from the start date of employment and maintain the employment level reached during the first year. If the employee does not satisfy this obligation, the business is obligated to return the applicable incentives. Despite this, not all termination of employment before the determined period means failure to satisfy the obligation. For example, a justified circumstance would include termination of employment for objective or disciplinary causes, as long as these causes were declared lawful, for resignation, death, retirement, or total or severe disability of the employee.

As seen, these types of contracts, which represent one of the greatest novelties of the Labor Reform, can be great help for small- and medium-sized businesses that can benefit from incentives as long as they comply with the requirements established for this type of contract.

This article is not considered as legal advice

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