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WORKING IN SPAIN

Everything you need to know if you lose your job in Spain

Losing your job can be tough at the best of times, but losing it abroad can be even tougher. Here's everything you need to know about losing your job in Spain and what you can do next.

Published: 25 January 2023 17:28 CET
Everything you need to know if you lose your job in Spain
Everything you need to know if you lose your job in Spain. Photo: Johnny Cohen / Unsplash

It’s a situation nobody wants to find themselves in, but can happen to anyone.

Losing a job can be stressful enough in your own country and native language, let alone abroad and in a foreign language. If this happens to you, there’ll likely be a never ending series of worries: what does this mean for my residency or VISA? How will I pay rent? hat if I think I was unfairly dismissed?

These are just a few examples of the types of worries that will likely be going through your mind if you lose your job, and knowing what to do next, the options available to you in Spain, and how to be go about them can really give you an advantage and help you bounce back.

Getting your head around Spanish system of redundancy pay, for example, or how to claim unemployment benefits and generally knowing your rights, can be a bit daunting.

Fortunately, The Local has put together all the information you’ll need in the event that you lose your job in Spain.

Types of dismissal 

In Spain, companies can generally carry out three types of dismissals: objetivo (the worker has no blame), disciplinario (the worker is at fault) and colectivo (objective dismissal of a significant number of workers).

However, if you (the employee) don’t agree with the reasons for being let go, you are within your legal rights by Spanish law to raise the matter with a judge to determine whether their dismissal was justified (procedente) or wrongful (improcedente).

READ ALSO: How much severance pay will I get if I’m sacked in Spain

Am I eligible for redundancy or compensation pay?

If you lose your job in Spain, you’ll need to know about redundancy payments (el finiquito) which everyone is entitled to, and any possible compensation payments (indemnización por despido) that depend on a variety of factors such as seniority, salary and the reason why the work relationship ended. 

El finiquito

In Spain, el finiquito refers to the financial settlement an employee receives when their contract is finalised.

This redundancy pay, often accompanied by an official dismissal letter stating the end of a worker’s contract, is a lump sum of money that a company must pay to an employee.

El finiquito is always paid when you lose your job, but how much you are paid depends on various factors, including how much salary you have outstanding, how many days you’ve worked that month, and any unused holiday days you have accrued.

El finiquito can include compensation payment, which depends on whether the employee was fired and the type of dismissal. 

Compensation pay (Indemnización por despido) 

Though the vast majority of contract workers are entitled to redundancy pay, you may also qualify for compensation payment, known in Spain as indemnización por despido.

However, unlike a redundancy payment that is uniform and everyone receives, for compensation there are some other key factors that determine if and how much you could be entitled to.

Annual salary – including overtime payments, commissions, bonuses and other supplements, the average year of overtime, productivity pay and other bonuses such a car or house owned by the employer. Tax allowances, cash tips and social security contributions are exempt from calculations.

Seniority – The number of months and years you’ve worked for the company. Generally speaking, if you’re fired without being at fault you’re entitled to 20 days of wages for every year you worked for the company, with the lump sum limit set at 12 monthly wage payments. For wrongful dismissals, this amount can be 33 days for every year worked (a lump sum limit of 24 monthly payments) and forjob contracts signed before 2012 it is 45 days of wages for every year worked (a maximum of 42 monthly wages).  

Type of contract termination – was it voluntary redundancy? Non-voluntary? Were you sacked for inappropriate behaviour? When a sacking is considered just or appropriate, there is no right to compensation, but you will still receive the redundancy payment. How exactly you were sacked can determine your compensation claim as only workers with despidos objetivos and improcedentes have the right to claim this type of compensation.

So for example, an employee who has worked for two years and three months for a company and has an annual gross salary of €14,000 is sacked and a labour court finds it was a wrongful dismissal. They were hired after 2012 so 33 days of wages correspond for every year worked (max 24 monthly payments). 

The calculation would be:

33 days x 2 years = 66 days

3 extra months = (33 x 3)/12 = 8.25 days

66 + 8.25 = 75 days of compensation pay

€14,000 gross annual salary/365 = €38.3 daily wages

€38.3 daily wages x 75 days of compensation = €2,887.5 of compensation pay for unfair dismissal

Am I entitled to unemployment benefit?

In Spain, if you’re unemployed but willing and able to work, if you’ve been made redundant, or your regular working hours and/or salary have been cut by anything between 10 percent and 70 percent, you can apply for unemployment benefit in Spain.

READ ALSO: UPDATED: Spain approves new €600 per month unemployment benefit for artists

How much is it?

According to the Spanish government, “unemployment benefit is calculated according to the regulatory basis; this, is the average of the contribution bases of the last 180 days of work prior unemployment. The amount of unemployment benefit during the first 180 days will be 70 percent of the regulatory base, and from day 181 it will be 60 percent of that base.”

The exact amount you’re entitled to, based on that calculation, may not be lower than the minimum limit or higher than the maximum limit established by Spain’s IPREM – the index reference used to calculate state aid such as the minimum wage and unemployment benefits.

How much you’re entitled to also depends on other factors, such as if you care for dependent children.

IPREM

On December 24th, the Spanish government announced Law 31/2022 (you can read the official Official State Gazette here)  that set the monthly IPREM at €600.

Based on that, the minimum amount of unemployment benefit for 2023 will be €560 (without children) and €749 for this with dependent children. The maximum is €1,225 for people without children and €1,400 for people with one child, and €1,575 for people with more than one dependent child.

You can find more information about the minimum and maximum benefits here.

How do I apply?

If you are registered and have previously contributed to Spanish social security, you are entitled to contributory unemployment benefit: (protección por desempleo), which in Spain is given to the unemployed who have contributed to social security for a minimum of 360 days during the previous 6 years before they were made unemployed.

What requirements must you meet?

In order to qualify:

  • you must be registered with social security
  • be legally unemployed, officially and actively looking for work though Spain’s employment office (Servicio Público de Empleo Estatal, known as SEPE) and willing to accept suitable employment
  • have paid social security contributions for at least 360 days in the 6 years previous to becoming unemployed
  • be at least 16 and not yet have reached retirement age.

How do I apply and claim?

You can apply for unemployment benefits here.

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For members

AMERICANS IN SPAIN

EXCLUSIVE: What the new Spain-US social security deal means for Americans

The Local speaks to the Spanish government and tax experts to understand what the new social security and pensions agreement between the United States and Spain means for American workers, digital nomads and pensioners in Spain.

Published: 15 May 2024 11:10 CEST
EXCLUSIVE: What the new Spain-US social security deal means for Americans

In early April, the United States and Spain announced a new social security and pension agreement.

The first update to the bilateral agreement between the two countries since 1986 was announced by US Ambassador to Spain, Julissa Reynoso, and Spain’s Minister of Inclusion, Social Security, and Migration, Elma Saiz.

The official agreement is unpublished so The Local spoke with a representative from Spain’s Ministry of Inclusion, Social Security, and Migration as well as international tax experts to understand the agreement in more detail.

Key aspects of the agreement

The Ministry told The Local Spain that the agreement is a step towards, bolstering mobility between Spain and the United States by improving pension calculations and social security protections.

The agreement has to do with the accumulation of benefits and affects working Americans living in Spain. There are two main components; the first affects which system people pay into (Spanish or American) and the second maximises the amount people can collect from social security.
 
Regarding paying into social security, the new agreement extends the “posting period” from three years to five years, with the possibility of extending it to seven years.

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This is meaningful for US employees who are working in Spain and means that they can now pay into the US social security system, rather than the Spanish social security system for longer.

Whereas the employee contributions in Spain and the United States are similar, 6.4 percent in Spain and 6.2 percent in the United States, the rate that employers pay differs greatly. In the United States the employer pays 6.2 percent into social security, whereas in Spain they pay 31 percent.
 
Why does this matter? “Previously when Americans moved to Spain, US employers were cutting the amount that they paid in salary because the cost of employment went up so much”, Louis Williams, Co-Founder and CEO of Entre Trámites, told The Local Spain.

It’s also made employers hesitant to grant digital nomads an Employer of Record (EOR) which would allow American workers to be on a Spanish contract.

READ ALSO:

In terms of collecting benefits, the representative from Spain’s Ministry of Inclusion, Social Security, and Migration says, “In the calculation of the Spanish pension there have been technical modifications that will benefit especially those people who developed their last working life in the United States, without this harming those who have worked in Spain immediately before requesting the benefit.”

In other words, under the new agreement, after calculating a person’s benefits under each country’s system, the recipient will be awarded the most beneficial of those two calculations.

Impacts for self-employed workers and digital nomads

According to the Ministry, “The agreement allows self-employed workers to temporarily move to the other State while maintaining their legislation, a possibility that was previously restricted only to employed workers.”
 
This has big implications for people who avoid moving to Spain because of the complicated social security contributions scheme, as they’ll now be able to continue paying US social security taxes (rather than Spanish) for up to seven years.
 
“The interesting thing is if this is extended to digital nomads because it would make the digital nomad visa more attractive,” says Williams.

“Why? Because if you’re posted by an employer (who can now avoid high Spanish social security taxes) you’re eligible for Beckham’s Law.” The law, which does not extend to autonomous works, can cap tax liabilities at 24 percent.
 
Being posted could make life much simpler, according to Elliott Locke, ACSI, co-founder of abroaden, a financial wellbeing and education start-up for people living abroad headquartered in Barcelona.

“The calculus is harder for freelancers given the different legal structures and methods for freelancing between the two countries. In many ways, if an American moves here to work remotely, it could be beneficial for them to have their US-based employer hire them on a local contract through an employer-of-record,” Locke told The Local.
 
In short, the new agreement could make it more attractive for U.S. companies to post employees in Spain, making them eligible for Beckham’s law and allowing autonomous workers to pay into the U.S. social security system, making it more beneficial and easier to be a digital nomad in Spain.

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Who benefits from the new agreement?
 
The people who will feel this new agreement the most are employers, digital nomads, retirees who have paid into both systems over the years, and finally, civil servants. “Spain has incorporated as possible beneficiaries of the Agreement those people who have contributed to the civil servant’s regime (passive class regime), who were excluded in the previous Agreement,” says the Ministry.
 
When can we expect the new agreement to come into force?

Don’t hold your breath; this is Spain after all, but we can expect the agreement to come into force within the next two years.

The deal has to pass through Congress before approval, which is likely why it has not yet been published. If things move quickly, people could expect to benefit within a year.

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