The wage guarantee fund in Spain will not contribute to dismissal contributions

The Spanish People’s Party Parliamentary group added an amendment to the Royal Decree Law 1/1995 of March 24, approving the consolidated text of Spanish Workers’ Statute during the treatment of the 2014 General State Budget Bill.

This amendment removes paragraph 8 of Article 33 from the Spanish Workers’ Statute, which means that the FOGASA (Fondo de Garantía Salarial or Wage Guarantee Fund in English) would no longer continue to contribute a portion of the dismissal compensation (indemnification or severance pay) for contracts of indefinite (permanent) employment. This would only apply to enterprises with fewer than 25 workers during dismissal procedures on objective grounds or for companies in insolvency.

The applicable legislation currently requires FOGASA to pay a minimum of 40% of the total dismissal compensation legally established (eight days of pay per year of service).

The proposed amendment’s final vote in the Senate and in the Congress of Deputies is still pending. However, if approved, it would take effect on January 1, 2014 and considerably increase the costs of dismissals of employees for enterprises with fewer than 25 employees.

 This article is not considered as legal advice

Labour Law

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