Agreement on labour reform

On 23 December 2021, the Government, employers and unions reached an agreement to reform the labour market. The pact established the permanent contract as the general rule and set new rules for temporary contracts, with the aim of reducing the high level of temporary employment. It was an agreement among all three parties, which gave the reform a broad social base. For many companies, that base meant a framework less exposed to sudden changes.

Hiring in Spain had for years been characterised by a high share of temporary contracts, and the reform aimed to correct that situation. For companies, the change was not minor: it affected how to organise staff, how to cover peaks of activity and how to manage seasonality. For workers, it sought greater stability. And for both, it raised the need to adapt to a new framework. Hiring rules affect very everyday decisions, from a summer hire to the staffing of a project.

What was agreed

The agreement had two main axes. On the one hand, it made the permanent contract the general rule, so that most hiring was expected to be done in that form. On the other, it set new rules for temporary contracts, which had to be limited to justified and specific causes, with the aim of reducing the high level of temporary employment.

An agreement among the three parties gave the reform a broad social base. Pacts between government, employers and unions tend to give rules more stability, because they have the backing of the main parties affected. Even so, their practical application depends on the details of the final text and on how they are interpreted in each sector and company. That is why it is worth consulting the applicable collective agreements and the interpretations of the competent bodies.

How hiring changes

For companies, the reform required reviewing how they hired: temporary contracts were heavily limited and the seasonal permanent contract (*fijo discontinuo*) gained prominence. This contract allows staff to be taken on permanently for activities that recur seasonally or intermittently, and it became a key route for sectors with variable demand.

Seasonality was no longer solved with successive temporary contracts. Sectors such as tourism, hospitality, retail or agriculture, with predictable peaks of activity, had to rethink their organisation and look for formulas that fitted the new framework. In many cases, this meant planning the workforce and its costs over the year further ahead. An annual calendar of needs makes it easier to decide which type of contract fits each period.

Adapting in time

Adapting in time avoided penalties. It is worth analysing the current workforce, what types of contracts exist, which might fall outside the rule and how activity will be organised in busier and quieter periods. Labour advisers can help to plan the transition, calculate the cost impact and review documentation in advance. An orderly review saves urgent queries when the time to apply the rule approaches.

A good starting point is to make an inventory of contracts, with their start and end dates, and compare it with the real needs of the business. From there, the options can be studied: conversion to permanent contracts, use of the seasonal permanent contract where appropriate or a reorganisation of shifts. Each alternative has cost and organisational implications that should be calculated before deciding. Planning hiring under the new rule is a management decision, not just one of compliance.

Those who review their workforce before the rule applies avoid hasty decisions afterwards.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.