Employment dismissals and consequent compensations
There are different types of contract terminations. The most widely used by employers are usually disciplinary or unfair dismissals. However, due to the economic collapse of the market, collective and objective redundancies are becoming more common, as companies simply cannot afford to employ and maintain the entire staff.
Collective redundancies. The majority of businesses are turning to large-scale redundancies due to economic reasons as well as productive, technical and organizational problems within the workplace. If affected over a period of 90 days by the previous factors, companies tend to choose this route. The business may opt for a collective redundancy if the following numbers of employees are affected:
- A company has fewer than 100 employees, and 10 are affected.
- A company has between 100 and 300 employees, and 10% of this number is affected.
- A company has over 300 employees, and at least 30 are affected.
A collective redundancy can only take place as long as the previous factors are met, and if there is a negative economic situation badly affecting the company. This type of dismissal may only be used if there is a guarantee that doing so will improve the future and growth of the company.
A large-scale dismissal needs to be approved in advance by the Labour Authorities. Authorities will either render in favour of the dismissal or the company will be denied the right to carry it out. A consultation period must also take place between Labour Authorities and the employees of the company. In case the collective redundancy is approved, the business will award each employee some compensation. This will consist of 20 days pay per year, for as many years as the employee has worked in the company.
Objective dismissals. Such dismissals are used if any of the following factors have occurred:
- An employee is hired, but it becomes apparent to the employer that he is incompetent or unsuitable for the job.
- The employee does not adapt well to his new job.
- The company needs to dismiss some of the employees due to economic or technical reasons.
- The employee is frequently absent from work, and if his absences exceed 20% of days he attended work over a period of two consecutive months. If the employee is absent from work for more than 25% of 1 year working days, over a period of 4 months.
For this type of dismissal to be carried out, the employer needs to send the employee a written notice at least 30 days before the dismissal date explaining the situation. The employee will then be awarded compensation of 20 days salary for each year he worked in the company.
Disciplinary Dismissals. This type of dismissal must follow a specific legal procedure that observes the law. This type of redundancy is carried out when there are proven reasons as to why employees should be dismissed. If employees commit any of the following factors, they may be made redundant:
- Lack of attendance and punctuality at work
- Lack of discipline and demonstrating disobedience in the work place
- Verbal or physical offences committed at work
- Breaking good contractual faith
- Decrease in the employee’s performance
- Intoxication or drug addiction
- Harassment
It is essential that employees receive a written warning before they are dismissed, so that they are given the chance to improve their behaviour. Most judges consider a dismissal as a last resort, so preventative measures are preferable.
Unfair Dismissals. Let us imagine that the employer has no reason at all to dismiss the employee. In this case, it is essential that the employee receives a written notification of the dismissal. Furthermore the employee must receive compensation of 45 days salary per year worked, as well as the corresponding severance pay.
If the employee feels he has been dismissed unfairly, he can appeal to the social jurisdiction. If the judge rules in favour of the employee and believes the dismissal to be unwarranted, the company will be obliged to continue to pay 45 working days per year that the employee has worked in the company plus the salary from the day the employee was made redundant until the day upon which the court renders in favour of the employee.
It is important and advisable to speak to a Human Resources specialist (Graduado Social) who has a degree in labour relations, when hiring and dismissing employees. If tackled incorrectly certain procedures may provoke unnecessary conflicts between employers and employees. However, it is very important to try to resolve any conflicts in a friendly and stress-free way, so that dismissing employees does not become too much of a troublesome subject.
Rafaela García López
Labour Advisor
De iure Laboral
