New Compensation Rules in Spain for the Termination of a Temporary Contract

A New Year and new laws are awaiting employers in Spain. 

Many are aimed at providing incentives to businesses in order to stimulate local labour markets while others may add additional red tape to already complex human resource management programs.

This article is part of  ELLINT ‘s January newsletter  which provides employers with a snapshot what they need to know about new regulations which may impact their human resource management and strategies over the next 12 months around Europe.


Under the Spanish Workers Statute, temporary replacement employees have worse termination conditions than a comparable permanent employee doing the same duties. In the first case, a replacement fixed-term employee would not be entitled to any severance compensation due to termination of contract, while a non-temporary employee would accrue a 20 days’ salary per year compensation upon contract termination.

However, such legal scheme has been recently challenged by the High Court of Madrid, by requesting a preliminary ruling from the European Court of Justice (ECJ Case – Ana de Diego Vs. Spanish Defense Ministry – Judgement of 14th September 2016), stating that Spanish national rules breach the non-discrimination principle established in Clause 4 of Directive 1999/70/EC (Framework Agreement on fixed-term work).

The ECJ has finally stated that such Spanish provisions in dispute do indeed breach the rights of fixed-term workers under Directive 1999/70 and that temporary replacement employees should not be treated less favorably than comparable permanent ones when calculating severance compensation due to termination of contract. The ECJ stated that the meaning of the term “employment conditions” under EU law includes compensations that the employer must pay to an employee on account of the termination of his/her fixed-term employment contract. The mere fact that the worker carries out his/her work on the basis of a temporary replacement contract, cannot constitute an objective ground justifying the failure to grant such compensation to that worker.

This ruling will have significant repercussions in Spain due to a significant increase of cost of severance compensations.  Not only for employers using temporary replacement contracts, but also for those using other types of fixed-term employees.

For more information visit Abdón Pedrajas & Molero