The Royal Decree 3/2014, passed on the 28^th February 2014, provides urgent measures to promote employment and indefinite employment contracts, including the reduction of Social Security business contributions for common contingencies.

Common contingencies of Social Security

The application requirements are the following:

Contractual agreements: this reduction in the contributions will only apply to the indefinite or permanent contracts, not being applicable for the remaining contractual agreements.

Contribution reductions may be applied for the following Working Times: this contribution may be applied for full-time indefinite contracts and for part-time indefinite contracts.

Application dates: reductions will be applied to contributions for common contingencies for all indefinite contracts executed between 25^th February, 2014 and 31^st December, 2014.

Reduction amount: the rates vary depending on the Working Times provided by the worker:

a) Full-time contract: 100 Euros will be paid per month for common contingencies.

b) Part-time contract: when the working day is equivalent to at least 75% of a worker´s full-time working day, 75 Euros per month will be paid for common contingencies.

c) Part-time contract: when the working day is equivalent to at least 50% of a worker´s full-time working day, 50 Euros per month will be paid for common contingencies.

Reduction deadline:  these reductions shall apply for a period of 24 months, calculated from the date of commencement of the contract, which must be formalised in writing.

After the period of 24 months, and during the following 12 months, companies with less than 10 employees will be entitled to obtain a reduction of 50% of contributions for common contingencies corresponding to the employees with indefinite contracts.

¿What requirements must be met by the companies in order to apply for this reduction?

1. To be up to date regarding their tax and Social Security obligations.

What happens if during the application of the reduction the company fails to comply with their tax or Social Security obligations?

If the company fails to pay their obligatory contributions, either totally or partially, there will be an automatic loss of reduction starting from the month in which the company failed to pay the contributions.

2. Not having terminated employment contracts for objective reasons or for disciplinary dismissals which have been declared inadmissible in court, or for collective dismissals in the 6 months prior to the reduction application.

This requirement will only affect extinctions carried out before 25^th February, 2014.

3. Draw up permanent contracts that will increase both the level of permanent employment and the level of total employment in the company.

¿How will this increase be calculated?

The average daily workers that have been employed by the company in the 30 days prior to the signature of the contract shall be taken as reference.

4. To maintain during a period of 36 months, from the date of signature of the permanent contract with the applied reduction, both the levels of permanent employment and of total employment.

The maintenance of the indefinite employment and total employment levels will be examined every 12 months.

In order to keep track of the levels, the average of indefinite workers and total workers of the month in which the examination will take place shall be taken as reference.

¿Will I fail to meet the requirements if I terminate employment contracts legally?

NO. Employment contracts that have been terminated for objective reasons or for disciplinary dismissals which have not been declared inadmissible in court will not be taken into account.

5. Not to have been excluded from access to benefits of employment programmes due to serious or very serious offenses.

Exclusions: these reductions will not be applicable in the following cases:

a) Special labour relations set forth in article 2 of the Workers´ Statute.

The following shall be considered as special labour relations:

– That of top management personnel

– That of domestic help

– That of convicts in penitentiary institutions

– That of sport professionals

– That of artists in public spectacles

– That of persons intervening in trading operations in behalf of one or more entrepreneurs without assuming full risk

– That of handicapped workers rendering services in special employment centres

– That of port stevedores rendering services through state companies or of persons performing the same functions as these in the ports managed by Regional Governments

– Any other job expressly declared a labour relationship of special character by Law

b) Contracts involving the spouse, parents, children and other relatives by consanguinity or kinship, up to the second degree, of the employer or of those with corporate control, who hold positions of leadership or members of the governing bodies of the entities or companies.

The recruitment of children who meet the requirements laid down in Law 20/2007 of 11th July of the Statute of Freelance Work is valid and therefore these are exempted from the last paragraph.That is to say, it is valid to recruit children who are under 30 years old, even if they are still living at home. In these cases, relatives will not be able to apply for unemployment benefits.

Children over 30 years old will receive this same treatment if they have special difficulties in finding employment due to cerebral palsy, mental illness or intellectual disability, with a degree of disability of 33% or over, or due to physical or sensory impairment, with a degree of disability of 65% or over.

c) Recruitment of workers whose activity includes them in any of the special systems established in the General Regime of Social Security (agriculture, household, freelancers or self-employed, coal mining).

d) The recruitment of employees who may have been exceptionally included in the Spanish National Budget for 2014, as set forth in Articles 20 and 21 of Law 22/2013 of 23^rd December.

e) Recruitment of workers who have been employed in other companies which belong to a holding company and whose contracts were terminated for objective reasons or disciplinary dismissals, having been declared inadmissible in court, or by collective dismissals, in the six months prior to the contracts that are compatible with the reduction.

The provisions set forth in the paragraph above shall not apply in cases of contract terminations that took place before 25^th February 2014.

f) Recruitment of workers who had already been indefinite employees at the same company or entity in the six months prior to the date of the contract.

The provisions set forth in the paragraph above shall not apply in cases of contract terminations that took place before 25^th February 2014.

What happens with the benefits obtained from this contract, for example, those of unemployment or retirement?Will they also be affected?

NO. The reductions mentioned in this section shall not affect the amount of the economic benefits that the workers may receive.

¿Are these reductions compatible with any other contribution benefits?

NO. These reductions will be incompatible with any other Social Security contribution benefits regarding the same contract.

What happens if I apply for this reduction but I do not meet the legal requirements?

In cases in which the applicant has failed to meet the requirements, he/she shall proceed to reimburse the corresponding amounts that the company did not pay due to the reductions, along with the corresponding delay surcharge or late payment interests, as provided in the Social Security legislation.

What happens if I do not maintain the levels of indefinite and total employment?

The reduction shall be void and you shall proceed to reimburse the amount received, from the start date in which the reduction took place, in the following terms:

1. If the failure to meet the levels required occurs 12 months from recruitment, the employer shall reimburse 100% of the reduction fees.

2. If the failure to meet the levels required occurs 24 months from recruitment, the employer shall reimburse 50% of the reduction fees.

3. In case the failure to meet the levels required occurs 36 months from recruitment, the employer shall reimburse 33% of the reduction fees.

In these cases a surcharge or late payment interests will not be charged.

May the failure to fulfill the requirements lead to an administrative sanction?

YES. The reimbursements mentioned in the above paragraphs shall not interfere with the restated text of the Law on infractions and sanctions regarding social order.

Therefore, the Social Security Treasury Office may initiate disciplinary proceedings if it deems it appropriate.