Spain’s labour laws are known for their robust protection of workers’ rights, with clear guidelines around wages, work conditions, and job security. However, a new set of reforms is on the horizon, poised to significantly reshape the labour market and working conditions. Here is an overview of the current Spanish labour law, the challenges workers face, and the major changes to expect in the near future.
Current Labour Law Framework in Spain
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Spain offers a comprehensive legal framework that ensures workers’ rights are respected. The Spanish Constitution and the Estatuto de los Trabajadores (Workers’ Statute) lay down essential principles, such as fair pay, equal opportunities, and the right to join trade unions. The current system provides substantial protections, including:
- Fair Wages and Minimum Wage: The minimum wage (Salario Mínimo Interprofesional, or SMI) is reviewed annually. For 2024, it stands at €15,876 annually for full-time work.
- Standard Working Hours: Spain maintains a 40-hour workweek, with flexible work arrangements being possible under certain circumstances. Overtime work is capped at 80 hours annually.
- Generous Vacation Time: Workers are entitled to 30 calendar days of paid leave, with additional days for public holidays.
- Social Security Contributions: Both employees and employers contribute to Spain’s Social Security system, which provides healthcare, pensions, and other social benefits.
However, there are challenges, such as the reliance on temporary contracts, high unemployment rates (especially among youth), and concerns over employer compliance with agreed labour deals.
Key Reforms for 2025: What’s Changing?
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A wave of reforms is on the horizon in Spain, aimed at modernising labour laws and enhancing workers’ quality of life.
1. Minimum Wage Increase
In a bid to improve purchasing power and reduce income inequality, the Spanish government will raise the minimum wage by 5% in 2025. This increase is an important step in supporting lower-income workers across the country.
2. Reduction in Working Hours
In 2025, Spain will implement its first reduction in working hours since 1983, reducing the standard workweek from 40 to 37.5 hours. This labour reform aims to improve work-life balance, reduce stress, and enhance overall employee well-being. It aligns with broader trends in Europe toward creating more flexible and balanced work environments. The reform will be formally implemented once published in the Official State Gazette (BOE), providing clear guidelines for companies to ensure compliance. Despite the reduction in hours, the goal is to maintain productivity while promoting employee health and satisfaction.
3. Mandatory Digital Time Tracking
Another significant reform involves digital time tracking, which will need to be adopted by all companies in Spain, replacing outdated manual methods.
This reform aims to increase transparency, ensure compliance with labor laws, and improve the accuracy of tracking working hours. Failure to implement a digital system could lead to penalties and legal issues. However, this new regulation also presents an opportunity for companies to modernise and streamline their HR processes.
4. Social Security Contributions
There will be an adjustment in the maximum contribution base for Social Security, which could result in a higher ceiling for contributions for employees with higher earnings. Additionally, new taxes such as the Solidarity Tax and Intergenerational Equity Mechanism (MEI) will apply, further impacting contributions for those earning above specific thresholds.
Solidarity Tax
The Solidarity Tax is a new feature in the Social Security contribution system that applies to workers earning above the maximum contribution base, specifically those with annual salaries exceeding €59,034. It is important to note that the Solidarity Tax does not impact the worker’s entire salary but only the portion that exceeds this limit.
The primary aim of the Solidarity Tax is to strengthen the sustainability of the Social Security system by redistributing contributions from higher-income workers. This ensures fairness in contributions, particularly from those who surpass the maximum contribution bases. Unlike other contributory contributions that provide future benefits, the Solidarity Tax is intended to improve the overall sustainability of the system, without granting additional rights to future benefits.
Furthermore, the Solidarity Tax will apply to both self-employed and employed workers under the Special Social Security Regime for Maritime Workers, as stipulated by Disposición Adicional Quinta of Law 47/2015 of October 21.
Contribution Rate Schedule for the Solidarity Tax (2025–2045):
The contribution rate for the Solidarity Tax will increase progressively, depending on the portion of income exceeding the maximum base.
| Year |
From the maximum base up to an additional 10% of the maximum base |
From the additional 10% up to 50% of the maximum basis |
From the additional 50% of the maximum base |
| |
Contribution rate in % |
Contribution rate in % |
Contribution rate in % |
| 2025 |
0,92 |
1,00 |
1,17 |
| 2026 |
1,15 |
1,25 |
1,46 |
| 2027 |
1,38 |
1,50 |
1,75 |
| 2028 |
1,60 |
1,75 |
2,04 |
| 2029 |
1,83 |
2,00 |
2,33 |
| 2030 |
2,06 |
2,25 |
2,63 |
| 2031 |
2,29 |
2,50 |
2,92 |
| 2032 |
2,52 |
2,75 |
3,21 |
| 2033 |
2,75 |
3,00 |
3,50 |
| 2034 |
2,98 |
3,25 |
3,79 |
| 2035 |
3,21 |
3,50 |
4,08 |
| 2036 |
3,44 |
3,75 |
4,38 |
| 2037 |
3,67 |
4,00 |
4,67 |
| 2038 |
3,90 |
4,25 |
4,96 |
| 2039 |
4,13 |
4,50 |
5,25 |
| 2040 |
4,35 |
4,75 |
5,54 |
| 2041 |
4,58 |
5,00 |
5,83 |
| 2042 |
4,81 |
5,25 |
6,13 |
| 2043 |
5,04 |
5,50 |
6,42 |
| 2044 |
5,27 |
5,75 |
6,71 |
| 2045 |
5,50 |
6,00 |
7,00 |
5. Intergenerational Equity Mechanism (MEI)
Another key reform is the Intergenerational Equity Mechanism (MEI), introduced as part of RD 2/2023, which aims to ensure the long-term sustainability of Spain’s pension system. The MEI represents a gradual increase in the Minimum Contribution Rate (MCR) from 2024 to 2029.
The MEI will rise from the initial 0.6% in 2023, with incremental increases each year, reaching 1.2% by 2029. From 2029 onwards, the rate will remain at 1.2%, equally divided between the employer and employee.
From 2029 onwards, the MEI will remain at 1.20%, with an equal split of 0.60% for both the employer and employee.
In 2025, with the addition of the MEI (0.8%), the total contribution rate for common contingencies will reach 29.1% (this is calculated by adding the 0.8% MEI to the base contribution rates).
Here’s a reminder of the approved and published increase schedule for 2023:
- MEI 2024: 0.70% (0.58% employer and 0.12% employee)
- MEI 2025: 0.80% (0.67% employer and 0.13% employee)
- MEI 2026: 0.90% (0.75% employer and 0.15% employee)
- MEI 2027: 1.00% (0.83% employer and 0.17% employee)
- MEI 2028: 1.10% (0.92% employer and 0.18% employee)
- MEI 2029: 1.20% (1.00% employer and 0.20% employee)
- MEI until 2050: 1.20% with an equal split of 0.60% for both the employer and employee
6. Severance Pay Reforms (Proposed)
The issue of severance pay has been a topic of significant debate in Spanish labor law, with a proposed reform currently under discussion. This reform aims to create fairer severance packages, particularly for employees who are unfairly dismissed. It includes the possibility of reinstating higher severance pay for workers with long tenures. The goal is to address the perceived shortcomings in the current system, which many argue makes dismissals too easy and cost-effective for employers.
Please note, this reform has not been approved yet, and while it may generate interest, we cannot guarantee its final approval or details at this stage. We will continue to monitor the situation closely and provide updates as they become available.
Preparing for the 2025 Changes
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The upcoming labour law reforms represent a significant shift towards a more balanced and employee-friendly labour market. Employers and workers alike need to prepare for the following:
- For Employers: It will be essential to review internal policies and systems to comply with the new working hours, digital time tracking, and changes in severance pay. Updating payroll and HR management tools will be crucial to ensure compliance and avoid penalties.
- For Workers: These changes could lead to improved work-life balance, better wages, and more job security. Workers should familiarise themselves with their rights, particularly concerning the reduction in working hours, the increase in the minimum wage, and the updated severance pay policies.
How BIPO Supports Businesses in Complying with Spanish Labour Law
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With offices across 160+ markets, including Spain, BIPO offers comprehensive HR solutions that streamline compliance with local labour laws while supporting global businesses in scaling efficiently.
As Spain’s labour laws continue to evolve, BIPO’s global payroll and HR solutions are designed to help you stay compliant with minimal effort. Our innovative platform offers the tools and local expertise needed to navigate complex labour regulations, empowering your business to grow confidently across borders.
BIPO’s in-country HR and payroll experts are ready to guide you through Spain’s evolving labor laws, including the upcoming changes. From digital time tracking to severance pay calculations, we ensure your business stays compliant while prioritizing employee well-being.
Take the next step towards simplifying your HR and payroll processes by partnering with BIPO. Contact us today to learn more about how our scalable solutions can support your business’s growth and compliance needs.
