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.

In particular, the “Vocational Training for Employment Subscheme”, regulated in Royal Decree 395/2007, 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 (i.e. demand-based training, supply-based training, training alternating with work; programs to support and accompany training).

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 women in general, women who are victims of gender-based violence, long-term unemployed persons, individuals receiving the unemployment benefit under the Social Security Special Agricultural Scheme 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, notwithstanding the analysis of Royal Decree-Law 10/2010 on Urgent Measures to Reform the Employment Market, performed in detail in the Chapter of this Guide entitled “Employment Market”, it is important to emphasize here those 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, the Royal Decree of reference 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 (between 16 and 30 years of age with special difficulties in finding employment, or older than 45 years of age). 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 wage guarantee fund and professional training, for employers executing traineeship contracts with unemployed persons registered at the employment office. An essential condition for the acknowledgment of these reductions is the ability to evidence, in the case of new contracts or temporary contracts converted into indefinite-term contracts, that there is an increase in the level of indefinite-term employment at the company or, in the case of traineeship contracts, that the company’s workforce is increased accordingly.

For more information on Aid and incentives, please download the following document:

Investment aid and incentives (1572kb.)

Prepared by Garrigues

Last updated: 19|07|2010