Temporary vs. Indefinite Contracts in Spain After the Reform

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The labor market in Spain has undergone its most significant transformation in the last decade following the entry into force of Real Decreto-ley 32/2021 (Royal Decree-Law 32/2021) on urgent measures for labor reform, the guarantee of employment stability, and the transformation of the labor market. This regulation, which substantially modified the Texto Refundido de la Ley del Estatuto de los Trabajadores (Recast Text of the Workers' Statute Law, approved by Real Decreto Legislativo 2/2015), has completely inverted the general rule of hiring. It has turned the indefinite contract into the absolute norm and reduced temporary contracts to highly restrictive and legally specified cases. Whether you are an employer who must adapt your workforce or a worker—national or foreign resident in Spain—who wants to know their rights, understanding the current difference between a temporary and an indefinite contract is crucial to avoid millionaire fines and legal claims for unfair dismissal.

The New Legal Paradigm: The Presumption of Indefiniteness

The great revolution of the labor reform is structured around the modification of *Article 15 of the Estatuto de los Trabajadores (ET / Workers' Statute). Following this reform, a clear legal presumption is established: the employment contract is presumed to be entered into for an indefinite period*.

Temporality is no longer a free choice for the employer, but rather an exception that must be rigorously justified. For a temporary contract to be valid in Spain, two cumulative requirements must be met:

1. There must be an enabling cause among those permitted by law.
2. The cause of temporality, the specific circumstances justifying it, and their connection with the planned duration must be specified with absolute precision in the written contract.

If these requirements are not met, or if the law is circumvented in bad faith (fraude de ley), the contract will automatically be considered indefinite from day one, in accordance with Article 15.4 of the ET.

Temporary Contracts After the Reform: Typologies and Strict Limits

The labor reform eliminated the historic contrato por obra o servicio determinado (contract for a specific project or service), which was the main route for temporary employment (and job insecurity) in Spain. Currently, there are only two major types of fixed-term contracts:

1. The contract for circumstances of production

This contract (regulated in Article 15.2 of the ET) can only be concluded in two very distinct situations:

• Occasional and unpredictable increases (and fluctuations in demand): This refers to circumstances that, even when dealing with the normal activity of the company, generate a temporary mismatch between the available staff and the staff needed. A typical example is the fluctuations caused by annual staff holidays. Its maximum duration is 6 months, extendable to 12 months by sectoral collective bargaining agreement (convenio colectivo).
• Occasional, predictable, and limited-duration situations: Designed for very specific campaigns (such as the Christmas campaign or the grape harvest). Companies can only use this contract for a maximum of 90 days in the calendar year, which cannot be continuous. Furthermore, companies must communicate their annual forecast for using these contracts to the legal representatives of the workers in the last quarter of the previous year.

2. The substitution contract

Regulated in Article 15.3 of the ET, this replaces the old contrato de interinidad (interim contract). It can be concluded under three strict scenarios:

• Substitution of a worker with the right to job preservation (for example, during maternity/paternity leave, forced leave of absence, or temporary disability). The provision of services can begin up to 15 days before the absence of the substituted worker occurs, in order to guarantee proper training or transition.
• To complete the reduced working hours of another worker (due to legally or conventionally established causes).
• For the temporary coverage of a job position during a selection or promotion process for its permanent coverage via an indefinite contract, in which case the maximum duration will be 3 months.

The limit on successive contracts (The 18-month rule)

To prevent the perpetuation of temporary employment, Article 15.5 of the ET tightened the limits: workers who, within a period of 24 months, have been contracted for more than 18 months (with or without interruption) for the same or a different job position with the same company or group of companies, through two or more contracts for circumstances of production (directly or through a Empresa de Trabajo Temporal / ETT, a temporary employment agency), will acquire the status of permanent (fijo) workers.

Indefinite Contracts: The General Rule and the Rise of the Permanent-Discontinuous Contract

The ordinary indefinite contract is one that is entered into without establishing time limits on the provision of services. However, to address seasonal or cyclical activities that were previously covered by fraudulent temporary contracts, the labor reform has strengthened and redesigned the *permanent-discontinuous contract (contrato fijo-discontinuo, Article 16 of the ET)*.

The permanent-discontinuous contract: What is it and how does it work?

This is not a temporary contract; it is an indefinite contract. It is concluded to carry out work that is seasonal in nature or linked to seasonal productive activities, or for the development of activities that, while not seasonal, are intermittent and have certain, determined, or undetermined execution periods.

• Seniority rights: The seniority (antigüedad) of these workers is calculated taking into account the entire duration of the employment relationship (including periods of inactivity), except for the calculation of severance pay, which is governed by the time of services actually rendered.
• *The call to work (el llamamiento):* This is the mandatory procedure by which the company summons the worker to restart activity at the beginning of the season. It must be done in writing or by the means determined by the applicable collective bargaining agreement, indicating the calendar and conditions for returning to work.

Economic Comparison: Severance Pay, Costs, and Contributions

The choice of one contractual modality or another has a direct financial impact both on monthly social security contributions and at the time the employment relationship is terminated.

| Concept | Temporary Contract (Circumstances of Production) | Indefinite Contract (Ordinary or Permanent-Discontinuous) | | :--- | :--- | :--- | | Severance pay for end of contract | 12 days of salary per year worked (Art. 49.1.c ET). Note: The substitution contract does not generate severance pay. | Not applicable (the contract has no end date). | | *Severance for Unfair Dismissal (Despido Improcedente) | 33 days of salary per year of service (maximum of 24 monthly payments). | 33 days of salary per year of service (maximum of 24 monthly payments). | | Severance for Objective Dismissal (Despido Objetivo) | 20 days of salary per year of service (maximum of 12 monthly payments). | 20 days of salary per year of service (maximum of 12 monthly payments). | | Social Security Contributions | Penalised with an additional fixed rate of around €29.74 in the contribution paid by the employer for each temporary contract lasting less than 30 days* (to prevent excessive turnover). | Ordinary contribution, with reductions/bonuses in certain cases for vulnerable groups or the conversion of temporary contracts to indefinite ones. |

Practical Examples with Real Figures

To understand the economic impact of the reform, we will analyze two contract termination scenarios in the current Spanish labor market.

Example 1: Carlos's temporary contract for circumstances of production

Carlos is hired as a shop assistant in a toy store for the Christmas campaign under a temporary contract for circumstances of production (predictable, maximum 90 days). His contract lasts exactly 3 months (90 days) with a prorated monthly salary (including extra payments, pagas extraordinarias) of €1,500.

• Carlos's daily salary: €1,500 / 30 days = €50/day.
• Calculation of severance pay for end of contract (12 days per year):
• Time worked: 0.25 years (90 days / 365).
• Accrued severance days: 12 days × 0.25 = 3 days.
• Total amount to receive for end of contract: 3 days × €50/day = €150.

If the company had terminated the contract early without justified cause (unfair dismissal of 33 days per year):

• Accrued severance days: 33 days × 0.25 = 8.25 days.
• Total amount for unfair dismissal: 8.25 days × €50/day = €412.50.

Example 2: Elena's unfair dismissal (Indefinite Contract)

Elena has been working as an administrative assistant under an ordinary indefinite contract since January 1, 2023. On December 31, 2023, the company decides to dismiss her unilaterally. The dismissal is judicially or administratively recognized as unfair (improcedente). Elena receives a monthly salary of €2,000 (with prorated extra payments).

• Elena's daily salary: €2,000 / 30 days = €66.67/day.
• Time of service: Exactly 1 year (365 days).
• Calculation of severance pay for unfair dismissal (33 days per year):
• Accrued severance days: 33 days.
• Total amount to receive: 33 days × €66.67/day = €2,200.11.

(Note: If the dismissal had been for duly justified economic or technical objective causes, the severance pay would have been 20 days per year, which would equal 20 days × €66.67/day = €1,333.40).

Step-by-Step Practical Procedures for Hiring and Labor Control

For both employers and workers, the process of formalizing and controlling employment follows a strict protocol before Spanish public bodies (the Servicio Público de Empleo Estatal - SEPE, the State Public Employment Service, and the Tesorería General de la Seguridad Social - TGSS, the Social Security General Treasury).

1. Drafting the contract in writing: Every temporary contract must be in writing, specifying the enabling cause under Article 15 of the ET. If it is a part-time indefinite contract or a permanent-discontinuous contract, the written form is also mandatory, detailing the working day and hourly distribution.
2. Registration with Social Security (TGSS): The employer must process the worker's registration (alta) through the Social Security's RED System prior to the start of the provision of services (up to 60 days before). A worker cannot be registered once their working day has already started.
3. Registration with SEPE: Within a maximum period of 10 days from the conclusion of the contract, the company must communicate the content of the employment contract to SEPE through the online application Contrat@.
4. Delivery of the basic copy: The company must deliver a basic copy of the contract to the legal representatives of the workers (if any) within a period not exceeding 10 days. Subsequently, this signed copy is sent to SEPE.
5. Control of the daily work record: Regardless of whether the contract is temporary or indefinite, the company has a legal obligation (according to Article 34.9 of the ET) to record the working hours daily, including the specific start and end times of each worker's shift.

Mistakes You Must Avoid

Making interpretation errors regarding the labor reform can lead to serious financial and legal consequences for companies, as well as the loss of rights for workers. Avoid the following common mistakes:

• Using temporary contracts to cover structural positions: Hiring temporary staff to cover peaks in work that repeat cyclically every year on the same dates is a fraud of law. In these cases, the correct contract is the permanent-discontinuous contract.
• Exceeding temporary limits without converting the contract: Forgetting to calculate the limit of 18 months within a 24-month period for the same worker or job position. The Social Security system detects these successive chains automatically and issues official penalty proposals.
• Failing to justify the cause of temporality in detail in the written contract: Generic clauses such as "due to circumstances of production because of increased activity" are not valid before a labor inspection (Inspección de Trabajo) or a social court. The specific event, whether unforeseen or predictable, that generates the hiring need must be detailed with precision.
• Omitting the call to work in permanent-discontinuous contracts: If a company does not summon a permanent-discontinuous worker at the start of the season following the established order of calls, the worker can sue for tacit dismissal (despido tácito) before the social courts, within a limitation period of 20 business days.

Frequently Asked Questions (FAQ)

What happens if my temporary contract is in fraud of law?

If your temporary contract does not meet the legal requirements (it has no justified cause, the maximum terms have been exceeded, or it has not been formalized in writing), you automatically acquire the status of an indefinite worker. You can request that the company recognize this status or file a complaint with the Inspección de Trabajo y Seguridad Social (Labor and Social Security Inspection) so that they can act officially.

What is the fine for a company that has fraudulent temporary contracts?

The Ley sobre Infracciones y Sanciones en el Orden Social (LISOS / Law on Infractions and Sanctions in the Social Order) establishes very severe penalties following the labor reform. Infractions for fraudulent temporary hiring are considered serious and are imposed for each of the affected workers individually (no longer globally). Fines range from a minimum of €1,000 to a maximum of €10,000 for each fraudulent contract detected.

Am I entitled to unemployment benefits (paro) at the end of a temporary contract?

Yes. The termination of a fixed-term employment contract due to the expiration of the agreed time is a legal situation of unemployment. If you have contributed for a minimum of 360 days within the 6 years prior to the end of the contract, you will have the right to apply for contributory unemployment benefits before SEPE.

In a permanent-discontinuous contract, can I work for another company during the period of inactivity?

Yes, absolutely. During the period of inactivity (when the company has "deactivated" you waiting for the new season), the employment relationship is suspended, not terminated. You have full freedom to work for another company (multiple employment or multiple activities), always respecting the duty of non-unfair competition if agreed, and you can also apply for unemployment benefits if you meet the contribution requirements.

In Summary

• Stability as the norm: The employment contract in Spain is indefinite by default; temporality is the absolute exception and requires rigorous documentary justification.
• Contractual simplification: The contract for a specific project or service was eliminated. Only temporary contracts for circumstances of production (maximum of 6 or 12 months for unforeseen events, and 90 days for predictable ones) and substitution contracts remain.
• Strict limits on successive contracts: A worker becomes permanent if they accumulate more than 18 months of contracting within a 24-month framework through temporary contracts for circumstances of production.
• Strengthening of the permanent-discontinuous contract: Designed for seasonal or intermittent activities, it offers stability to the worker (indefinite contract) and flexibility to the company through the system of calls to work.
• Individualized sanctions: Labor Inspection fines for fraud in temporary hiring are applied per affected worker, and can reach up to €10,000 per contract.

General legal information, not personalised legal advice. For your specific situation, ask your question for free at AbogadoAI — answers grounded in Spanish law (BOE), in English.

This is general information, not legal advice. Verify on the BOE or consult a lawyer for your specific case.