What are the differences between the different employment contracts?

The economy is improving and, obviously, this means that your business is growing. So it may be time to take on new employees. It's a risky bet, but it will undoubtedly open up new career opportunities for you. 

However, before hiring someone, you must be aware of the different types of contracts that are currently covered by Spanish legislation. Moreover, since the publication of Royal Decree Law 16/2013, of 20 December, you can say that you are in luck. Before its entry into force, there were 42 different types of contracts in Spain. Afterwards, they were reduced to four. We are going to talk to you about them in depth so that you can learn more about their characteristics and find out which model suits you best. 

The open-ended employment contract

An open-ended contract is a contract that does not establish a specific time limit for the provision of services by the employee. Therefore, they are valid until one of the two parties decides to terminate the employment relationship that unites them. 

These contracts may be part-time or full-time, as well as for the provision of services that, although fixed, are provided on a discontinuous basis. Moreover, they may be formalised in writing or verbally. This is the case except in certain specific cases, such as, for example, workers who, despite being hired in Spain, work abroad, those hired on a part-time basis, as relief for another worker or in the form of a permanent-discontinuous contract. In any case, both the employee and the employer have the right to demand that the contract be formalised in writing at any time after its conclusion.

Bonuses for permanent contracts

In order to encourage the number of open-ended contracts in Spain, the public authorities established a series of bonuses for companies. For example, if the contract is a full-time contract, the Social Security exempts the company from paying the first €500 of the worker's contribution base. This amount will be reduced proportionally in the case of part-time contracts as long as they represent 50% of the working day. 

New companies can take advantage of this bonus for all the workers they hire for a period of 24 months. Likewise, in the case of companies with less than 10 workers, it will be extended for a further year. During these last 12 months, only the first €250 will be deducted from the hiring base in cases corresponding to partial hiring. 

These contribution benefits will only be applicable in the event that the employer makes an open-ended contract with young people who are registered in the National Youth Guarantee System through the State Public Employment Service or in that of the Autonomous Community in which they reside. In the case of micro-enterprises and the self-employed, this incentive is up to 100 % during the first year as regards the Social Security contribution for common contingencies. 

Temporary contracts

As its name suggests, this type of contract is a fixed-term contract. They can also establish a full or part-time working day for the worker and must always be formalised in writing. They can be of the following types:

1. For work or service: these are a type of open-ended contract as they are not for an indefinite period, but end when the work or service for which the worker was hired is completed. 
2. Temporary contracts due to production circumstances: these are designed for specific moments when a company sees an increase in its orders and workload. They cannot have a duration of more than 6 months. 
3. Interim: intended for workers who are going to cover the sick leave or leave of absence of another worker.

Bonuses for temporary contracts

There are only bonuses for this type of contract if it is converted into an indefinite-term contract within a minimum period of three months. 

For example, if after the third month of its entry into force it becomes permanent and with a stipulated working day of more than 50%, the employer will receive a subsidy of €500/year on their social security contributions. This will be increased to 700 €/year in the case of a woman. 

On the other hand, if the temporary contract is an interim contract, i.e. the worker comes to the company to replace another worker who has requested a leave of absence for family care or maternity, the reduction in Social Security contributions is 95% during the first year, 60% during the second year and 50% during the third year. It can be as much as 100 % if there are risks during pregnancy or breastfeeding or if the hiring is to cover the temporary incapacity leave of a worker with a disability. 

Training and apprenticeship work contract

Its objective is to allow young people to train and gain experience in the sector in which they are working. It can only be used for people under the age of 25 or, failing that, under the age of 30 if the unemployment rate is below 15 %. Moreover, it can only be used when the subject lacks the necessary qualifications for a traineeship contract to be concluded. 

It can have a duration of between 6 months and 3 years and there is no possibility of part-time work. It does not allow the worker to work night shifts, rotating shifts or to work overtime. 25% of the working day during the first year, as well as 15% of the second year, must be devoted to training. 

Allowances associated with the training and apprenticeship employment contract.

Companies with fewer than 250 employees may deduct 100% of the employee's social security contributions for the duration of the contract. Those with more than 250 workers can only deduct 75%. In addition, if they become permanent, the rebate will also include a reduction in employer contributions of €1500/year for 3 years. If they are women, the reduction will be €1,800/year.

The internship contract

The purpose of this type of contract is to provide the employee with experience appropriate to his or her academic qualifications. Therefore, in order for it to be concluded, it is indispensable that the future employee has a vocational training qualification, a professional certification or a university degree. This is a very interesting model for the employer.

Discounts linked to the internship contract

The employer may benefit from a 50% reduction of the social security contribution if the employee is under 30 years of age or under 35 years of age if he/she has a disability equal to or greater than 33%. In addition, this reduction will be increased to 75% if, at the time of hiring, the worker was doing a non-labour internship. 

We hope we have been helpful and have cleared up any doubts you may have had about the types of employment contracts. As you may have noticed, although there are more specific subcategories, the complexity of the system has been significantly reduced since 2013, which is an advantage for both the employer and the employee.

Our lawyers say

We hope we have been helpful and have cleared up any doubts you may have had about the types of employment contracts. As you will have seen, although there are other more specific subcategories, the complexity of the system has been significantly reduced since 2013, which is an advantage for both the employer and the employee. We hope we have been of help to you in resolving your doubts about this figure and in making your decision. If you have any doubts, contact G. Elías y Muñoz Abogados, and our lawyers, experts in labour law, will attend to you with the utmost professionalism that this type of case requires.