Duration of the employment contract in Spain and retirement age




There are various companies that hire staff in Spain (in the context of branches, subsidiaries etc) and in many cases they are not informed about the mechanisms concerning the retirement age and the duration of the employment relationship.


According to Spanish law, the retirement age is as follows:

1. at the age of 65, if the employee has reached 37 years and 6 months of contributions

2. at the age of 66 and 2 months of age, if the years of contributions are lower than those mentioned above


The general rule on the matter provides that retirement is a right, not an obligation for the employee: for this reason, an employee may request that the employment relationship not be terminated for the mere occurrence of one of the conditions referred to in points 1 and 2.


Despite this, there are exceptions provided for in the Workers' Statute for which the employer can terminate the contract and impose retirement on the employee, provided the following conditions are met:


  1. The employee must be at least 68 years of age, and be entitled to 100% of the contributory benefit for seniority

  2. The company must establish measures to support employment, alternatively it can hire a new employee and / or convert a fixed-term contract. Furthermore, "in order to compensate for the forced retirement of an employee with a general improvement in employment, it is necessary that, in addition to satisfy one of the above conditions, at least one of the employees of the company, even among those already employed in the same, is promoted to a job whose contribution is equal to or greater than that of the retired employee "

  3. It must be provided for in the applicable collective agreement (Convenio).


Finally, it must be taken into account that there are specific retirement provisions for those companies with a female employment rate of less than 20%.


Therefore, in the event that the above requirements are not met, the company will not be able to terminate the employment contract for the retirement age of the employee, if the latter does not agree.


If the physical or intellectual abilities of the employee prevent or diminish the aptitude of the employee to work (so-called in spanish “ineptitud sobrevenida”, provided for by art.52 of the Workers' Statute), the company may terminate the contract by dismissal for just cause with 15 days' notice in which he will justify the reasons for the termination, and will have to pay him compensation corresponding to 20 days of wages per year worked.


BENEFITS FOR THE EMPLOYER AND THE COMPANY:


There are additional aspects that must be taken into account, if the employee decides to continue the employment relationship after retirement age:


The employee will receive a pension increase for each additional full year worked, as long as he has reached the minimum contribution period of 15 years, two of which in the last fifteen years before retirement.


Reduction of contribution costs, both for the company and for the employee (pursuant to art, 152 LGSS).


EARLY RETIREMENT


Early retirement is a resource widely used by companies in response to the extension of the retirement age, with this system the employee will be able to retire early, maintaining an income level very similar to what he had while working. It is an agreement between employer and employee aimed at terminating the contract before retirement age, but it is not a type of retirement recognized by the Spanish Social Security. Therefore, it does not require specific requirements other than those established by mutual agreement by the employee. and the company.


The employer pays the worker, by way of allowance, an amount that is added to the unemployment allowance, until the employee can access early retirement. Usually the aforementioned amount is equivalent to 60 and 80% of the salary received by the employee during the activity.


Furthermore, the company is obliged to pay Social Security contributions for the entire period in which the worker is unemployed (from the date of leave from the company until the retirement age is reached). Payment can be made directly to social security institutions or by paying the sums to the worker to make the deposit.


Ms. Inmaculada García Alcantara, labor consultant and Abogada Eugenia Ravagnan Venezze


This article is written by a licensed lawyer and labor consultant in Spain, members of our international network. The content of this article does not constitute legal advice, but has an informative function. For tailor made legal advice, contact the firm by e-mail to: info@dongpartners.eu or by phone +39 06 916505710. © Dong & Partners International Law Firm, All rights reserved.

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