Spain has some of the most detailed employment protections in Europe, and getting termination wrong is expensive. If you’re a foreign employer managing Spanish staff directly or through a local entity, you need to understand which termination type applies, what paperwork is required, and what you owe on the way out. This guide covers every scenario you’re likely to face.
The legal framework
Employment in Spain is governed by the Workers’ Statute (Estatuto de los Trabajadores), enforced by the Labour Inspectorate. Most employment rights are mandatory, meaning you can’t contract out of them. Spanish courts take a strict view of procedural compliance: even a dismissal that’s substantively valid can be overturned on a technicality, triggering unfair dismissal liability.
Types of termination
Spain recognises several distinct termination types, each with its own rules, notice requirements, and severance entitlements. Which one applies depends on the reason for ending employment.
Disciplinary dismissal
Disciplinary dismissal (despido disciplinario) is reserved for serious employee misconduct. Examples include repeated absences, insubordination, fraud, and harassment.
Key rules:
- No notice period required
- No severance if the dismissal is upheld as fair by a court
- You must issue a written dismissal letter specifying the grounds and the effective date
- Since November 2024, you must offer the employee a prior hearing before the dismissal takes effect; skipping this step puts the dismissal at risk of being declared unfair
The prior hearing requirement is relatively new. Make sure your HR process is updated if you haven’t reviewed it since late 2024.
Objective dismissal
Objective dismissal (despido objetivo) covers business, economic, technical, or organisational reasons. It’s the route to take when a role becomes redundant or the company needs to restructure without triggering the collective dismissal thresholds.
Key rules:
- 15 calendar days’ notice required (or pay in lieu)
- Severance: 20 days’ pay per year of service, capped at 12 months’ salary
- You must provide the employee with a written letter stating the cause
Partial years of service are pro-rated.
Collective dismissal (ere)
A collective dismissal, known as an Expediente de Regulación de Empleo (ERE), is required when redundancies cross certain thresholds:
- 10 or more workers in companies with fewer than 100 employees
- 10% or more of the workforce in companies with 100 to 299 employees
- 30 or more workers in companies with 300 or more employees
An ERE is a regulated process. You must open a formal consultation period with workers’ representatives and notify the SEPE (Spain’s state employment service). Severance is the same as objective dismissal: 20 days’ pay per year of service, capped at 12 months.
If you’re running a headcount reduction across a Spanish entity, check the thresholds carefully. Misclassifying a collective redundancy as a series of individual objective dismissals is a common and costly mistake.
Unfair dismissal
If a disciplinary or objective dismissal is challenged and a court finds it unfair (despido improcedente), you face a choice between two remedies:
- Reinstatement of the employee
- Severance of 33 days’ pay per year of service, capped at 24 months’ total salary
In practice, most employers opt for severance. One important detail: for employees whose contracts were signed before February 12, 2012, the pre-reform rate of 45 days per year applies for the portion of service completed before that date. You calculate the two tranches separately and add them together.
Fixed-term contract expiry
When a fixed-term contract ends by its natural expiry date, it isn’t a dismissal. However, you still owe the employee an indemnity of 12 days’ pay per year of service, pro-rated for partial years.
This indemnity doesn’t apply to training contracts (contratos formativos) or substitution contracts (contratos de sustitución). If you’re not sure which contract type you’ve used, check the original agreement.
Probation period terminations
Either party can end employment during probation with no notice and no severance. The maximum probation periods are:
- Technicians and qualified staff: up to 6 months
- All other employees: up to 2 months (up to 3 months in companies with fewer than 25 employees)
Once probation ends, full dismissal rules apply. You can’t extend probation beyond the statutory maximum, even by agreement.
Employee resignations
If an employee resigns, they must give 15 calendar days’ notice. If they don’t, you can deduct pay for any unworked days from their final settlement. No severance is owed on resignation.
Constructive dismissal
There’s one significant exception. If you substantially change an employee’s working conditions without a valid legal justification (cutting pay, demoting them, changing location without consent), the employee can leave and claim constructive dismissal (despido indirecto). Courts treat this as an unfair dismissal, which means severance of 33 days’ pay per year of service applies. Unilateral changes to contract terms carry real financial risk in Spain.
Final pay and settlement
On or before the last working day, you must pay the employee everything they’re owed:
- All outstanding salary to date
- Pro-rated 13th and 14th month payments (if applicable under their collective agreement or contract)
- Compensation for any unused annual leave
Spain operates with two standard extra salary payments per year, typically at Christmas and in summer, though the timing varies by sector. If you miss the final pay deadline, 10% annual interest applies to the outstanding amount from the due date.
Non-EU workers: immigration notice
If the employee holds a non-EU work permit, their visa or permit is tied to that specific employment. You must notify immigration authorities of the termination. Failing to do so creates compliance exposure for your company, and it also leaves the employee in an uncertain legal position, so prompt notification matters.
Managing spanish terminations as a foreign employer
Foreign companies employing Spanish workers directly need a registered legal presence in Spain to run payroll and comply with labour law. Many companies without a Spanish entity use an Employer of Record (EOR) to hire and manage Spanish employees legally without setting up a subsidiary.
An EOR handles the employment contract, payroll, social security contributions, and termination administration on your behalf. When a termination is required, the EOR manages the process under Spanish law, calculates the correct severance, issues the dismissal letter, and handles any required notifications. Reputable EOR services will also flag procedural requirements like the prior hearing obligation so nothing gets missed.
FAQ
What’s the difference between objective dismissal and unfair dismissal in Spain?
Objective dismissal is a legitimate termination for business or economic reasons. It carries a statutory severance of 20 days per year of service. Unfair dismissal is what courts declare when a dismissal (disciplinary or objective) doesn’t meet the legal requirements. Unfair dismissal severance is higher: 33 days per year of service, capped at 24 months.
Do I have to pay severance when a fixed-term contract ends?
Yes, but the amount is lower. Fixed-term contract expiry triggers an indemnity of 12 days’ pay per year of service. Training contracts and substitution contracts are exempt.
Can I dismiss an employee during their probation period without severance?
Yes. Either party can end the contract during probation with no notice and no severance. The probation period can’t exceed the statutory maximum: 6 months for technicians, 2 months for other staff (3 months in companies with fewer than 25 employees).
What happens if I don’t give the employee a prior hearing before a disciplinary dismissal?
Since November 2024, failing to offer a prior hearing puts the dismissal at risk of being declared unfair by a court. If that happens, you’ll either have to reinstate the employee or pay unfair dismissal severance of 33 days per year of service, capped at 24 months.
