Training and employment incentives form part of the Spanish government’s job creation policy, and are currently delivering major savings in labor costs to the employers receiving them.

Since the approval of Royal Decree 395/2007, regulating the Vocational Training for Employment Subscheme, Vocational Training for Employment has combined both the training aimed at employed workers (Ongoing Vocational Training) and the training aimed at unemployed workers (Occupational Training) under a single model of Vocational Training for Employment.

In this context, the Vocational Training for Employment subscheme encompasses a set of instruments and actions aimed at encouraging and extending to companies and to employed and unemployed workers a type of training that meets their needs and contributes to the development of a knowledge based economy.

These programs include most notably the credit allocated to employers for demand-based vocational training, collected in the form of reductions in social security contributions and subdivided into two types: (i) credit for carrying out own training programs and (ii) credit for granting workers individual leaves of absence for training (additional to the preceding credit, up to the limit stipulated annually in the General State Budgets Law).

The creation of indefinite-term employment is also encouraged with the granting of aid to employers, consisting mainly of reductions in social security contributions, aimed at fostering the hiring of new employees on a stable or indefinite-term basis (especially targeted at unemployed persons included in groups such as, inter alia, women who are victims of gender-based violence, young people of between 16 and 30 years of age, long-term unemployed persons, unemployed persons over 45 years of age and the disabled) and, in certain cases, promoting the conversion of temporary jobs into indefinite-term jobs.

In addition to the foregoing, with a view to palliating the effects of the current international financial crisis, Royal Decree 1975/2008 on Urgent Measures to be adopted in economic, tax, employment and housing matters, created a new type of aid consisting of reductions in employer social security contributions, the purpose of which is to foster the hiring of employees who are “unemployed and have family responsibilities” on an indefinite-term basis.

Other aid and additional subsidies (i.e. up to not more than €5,108 per job filled with an indefinite-term employee) may be granted to investment projects aimed at the generation of economic activities and stable jobs in Spanish local and regional areas able to be classed by the National Public Employment Service (INEM) as investment and employment (I&E) projects or employers. Such projects must be promoted by local governments through the relevant contribution of economic and/or material resources, although the INEM is in charge of processing applications, choosing the projects and granting the aid.

Lastly, Law 35/2010, of September 17, 2010, on Urgent Measures to Reform the Employment Market includes a number of measures aimed at contributing to the objectives which inspire the Law, setting up an aid system which serves as a special incentive for the employment of young people and unemployed persons.

This aid system takes the form of a specific policy under which an employer’s social security contributions are reduced for employees hired under indefinite-term contracts, (i) specifying which groups of employees must be hired under an indefinite-term contract in order for the reductions to apply; (ii) improving the amounts for some of these groups; and lastly (iii) stipulating a time limit for applying the reductions, thus permitting an assessment of their results.

Specifically, Law 35/2010 provides for two cases in which the beneficiary of this aid is entitled to request reductions in its social security contributions. First, reductions in the employer’s social security contributions are stipulated for companies hiring, under indefinite-term contracts, unemployed persons in two specific age groups (individuals between 16 and 30 years of age with special difficulties in finding employment who have been registered at the Employment Office for at least twelve months in the eighteen months prior to the contract and who have not completed their obligatory schooling or do not hold any professional qualification; and individuals over 45 years of age who have been registered at the Employment Office for at least twelve months in the eighteen months prior to the contract) or for the conversion of temporary or training contracts into indefinite-term contracts.

The law also acknowledges a 100% reduction in the employer’s social security contributions for common contingencies, as well as those relating to occupational accidents, occupational illnesses, unemployment, the wage guarantee fund and professional training, for employers executing training contracts with unemployed persons registered at the employment office.

These reductions are recognized on the condition that the new hires or temporary contracts converted into indefinite-term contracts must increase the level of indefinite-term employment at the company.

For further information, visit the extended version of our online Guide to Business:

Investment aid and incentives in Spain

Prepared by Garrigues

Last updated: 28|06|2011