One of the main objectives of the 2022 labor reform was to stabilize employment, hence its main measures were aimed at changing hiring models to reduce temporary employment. That objective was met, although it did not manage to reduce employee resignations even when their contract was discontinuous.

A few months ago, the European Committee of Social Rights (ECSR) of the Council of Europe gave a warning to Spain, warning them that dismissals in Spain were too cheap. The latest data of the report’Layoff Statistics and their Cost prepared by the Ministry of Labor and Social Economy, they agree with Europe.

Less compensation after the reform. According to the official data contributed by Labor, the average compensation received by dismissed employees in 2021 (before the reform came into force) was 11,416.74 euros. Data from the 2023 edition of that same report reveal that in 2023 the average compensation was 7,446.26 euros. That is, 35% lower than before the reform.

It has not gone down for everyone equally. However, and as sometimes happens, the average data can blur the reality of this situation. Unlike 2021, in 2023 permanent contracts have become the most common option in the labor market, so it makes sense to focus on compensation by type of contract.

In 2021, the average compensation for employees with a full-time indefinite contract was 18,112.4 euros, while in 2023 that figure fell to 9,768.1 euros. This represents a decrease of 46%. This drop in the average amount of compensation amounts to up to 56% in the case of employees with part-time contracts and up to 65% for permanent discontinuous employees.

More layoffs, less compensation. Unlike the average amount of compensation, the number of layoffs has not stopped increasing since the last labor reform came into force. The figures in the report point to an increase of 35%, reaching 606,625 layoffs recorded in 2023, while the absolute number of workers laid off in 2023 increased by 34% with 593,182 affected.

This, in year-on-year terms, leaves an annual increase in layoffs of 14.8%, a 13.8% increase in the number of workers affected, and each year there are 9% more companies carrying out these layoffs.

The reform did not affect compensation. One of the explanations for this decrease in the amount of compensation is that, although the hiring conditions were changed, the dismissal conditions included in the Workers Statute.

The increase in the number of dismissals in the years after the reform fell on employees with temporary or part-time contracts, with less paid time and lower salaries, causing the average of the total to drop.

What Europe asked for. The Council of Europe asked Spain to make some modifications to the regulations that regulate compensation for unfair dismissal that have been applied in Spain since the labor reform of 2012. These new conditions were included in article 24 of the European Social Charter. This article introduces a new concept in the calculation of dismissal: restorative dismissal.

Instead of being set based on established scales as is the case now, this concept of restorative dismissal would condition the employee’s compensation to their personal situation. In this way, two employees in identical dismissal situations may receive different compensation based on their age, sex, marital status, place of residence, etc., and it is up to the courts to decide the exact amount of the dismissal.

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