Termination and Severance in Spain Explained

Employment termination in Spain is one of the most heavily regulated aspects of labor law, with significant financial implications for employers. Understanding the different types of dismissal, their requirements, and the associated costs is crucial for international companies managing their Spanish workforce.

Types of Employment Termination

Spanish law distinguishes between several categories of employment termination, each with distinct procedures and consequences:

• Mutual Agreement: Both parties agree to end the employment relationship
• Employee Resignation: The employee voluntarily leaves, typically with notice
• Objective Dismissal: Based on economic, technical, organizational, or production reasons
• Disciplinary Dismissal: Due to serious employee misconduct
• Collective Dismissal (ERE): Affecting multiple employees within specific thresholds

Objective Dismissal: Procedure and Costs

Objective dismissal requires demonstrable business justification and strict procedural compliance. Employers must provide 15 days' written notice, detailing the specific reasons and making available the statutory severance payment of 20 days' salary per year of service, capped at 12 months' pay.

The dismissal letter must be precise and factual, citing concrete economic data or organizational changes. Vague or generic justifications will likely result in the dismissal being declared unfair by labor courts.

Disciplinary Dismissal: High-Risk Territory

Disciplinary dismissal carries no severance obligation if the employer can prove serious misconduct. However, if challenged and the employer cannot substantiate the allegations, courts will declare the dismissal either unfair (improcedente) or null (nulo), resulting in significant compensation or mandatory reinstatement.

Common grounds for disciplinary dismissal include:

• Repeated unjustified absences or lateness
• Breach of good faith or abuse of trust
• Verbal or physical offenses
• Continuous decrease in work performance
• Habitual drunkenness or drug abuse affecting work

Severance Calculations

Severance in Spain depends on the dismissal classification:

• Fair Dismissal (Procedente): No compensation for disciplinary; 20 days/year for objective (max 12 months)
• Unfair Dismissal (Improcedente): 33 days/year of service (max 24 months) for contracts after February 2012
• Null Dismissal (Nulo): Mandatory reinstatement plus back pay

For employees hired before February 2012, a transitional calculation applies, potentially combining 45 days/year for pre-reform service with 33 days/year thereafter.

The Conciliation Process

Before filing a lawsuit, Spanish law requires a mandatory conciliation attempt (papeleta de conciliación) at the regional mediation service. This meeting, typically scheduled 15-20 days after filing, offers an opportunity for settlement. Many cases resolve at this stage, often with negotiated severance slightly above the unfair dismissal statutory amount.

Collective Dismissals: Additional Requirements

When terminations exceed specific thresholds (10+ employees in companies with under 100 workers, 10% in medium companies, or 30+ in large companies) within a 90-day period, collective dismissal procedures apply. This triggers mandatory consultation with employee representatives, notification to labor authorities, and significantly more complex documentation requirements.

Protecting Your Company

International employers should maintain meticulous documentation of employee performance, conduct issues, and any business justifications for restructuring. Our employment law team regularly advises on dismissal strategy, documentation preparation, and representation in conciliation and labor court proceedings.