Types of dismissal in Spain: a practical guide for SMEs
Dismissing an employee is never a minor decision, and getting it wrong can prove very costly. Choosing the wrong type of dismissal, failing to follow the required procedure or not gathering the right evidence can turn a justified termination into an unfair dismissal, with the corresponding severance pay. In this guide we review, in plain language and updated for 2026, the main types of dismissal recognised by the Estatuto de los Trabajadores (Spain’s Workers’ Statute), their grounds and their financial consequences.
What is a dismissal
A dismissal is the termination of the employment relationship by unilateral decision of the employer. It is not the same as a voluntary resignation (initiated by the employee) or the end of a temporary contract that has reached its term. We speak of dismissal when the company decides to end the contract early, or without there being an automatic cause for termination.
The Estatuto de los Trabajadores distinguishes three broad categories: disciplinary dismissal, objective dismissal and collective dismissal. Each responds to different grounds, requires a different procedure and generates very different financial consequences.
Disciplinary dismissal
Disciplinary dismissal occurs when there is a serious and culpable breach on the part of the employee. It is the route the company uses when the employee has done something that justifies the immediate end of the contract, with no notice or severance pay required if the dismissal is confirmed as fair.
Grounds for disciplinary dismissal
Article 54 of the Estatuto de los Trabajadores lists the grounds:
- Repeated and unjustified absences or lateness.
- Insubordination or disobedience at work.
- Verbal or physical offences against the employer, colleagues or their relatives.
- Breach of contractual good faith and abuse of trust.
- Continued and voluntary drop in performance.
- Habitual drunkenness or substance abuse affecting work.
- Harassment on grounds of origin, sex, religion, disability, age or sexual orientation, and harassment of the employer or other employees.
Procedure and classification
Disciplinary dismissal must be communicated in writing by means of a dismissal letter, stating the specific facts and the effective date. Be careful with this point: an imprecise letter, or one without dates, is one of the most common reasons for a judge to declare a dismissal unfair. Depending on how the labour court (juzgado de lo social) assesses it, the dismissal may be:
- Fair (procedente): the grounds are proven and the procedure is correct. The employee is not entitled to any severance pay.
- Unfair (improcedente): the grounds are not proven or the procedure was not followed. The company must choose between reinstating the employee or paying compensation of 33 days’ salary per year worked (up to a maximum of 24 monthly payments), plus 45 days per year for time worked before 12 February 2012.
- Null (nulo): the dismissal infringes fundamental rights or affects protected situations (pregnancy, parental leave, victims of gender-based violence, etc.). It requires immediate reinstatement together with payment of back pay accrued during proceedings (salarios de tramitación).
Objective dismissal
Objective dismissal terminates the contract on grounds unrelated to the employee’s conduct: economic, technical, organisational or production reasons, or personal circumstances that make it impossible to continue the employment relationship.
Grounds for objective dismissal
Set out in article 52 of the Estatuto de los Trabajadores:
- Ineptitude of the employee, whether known or arising after they joined.
- Failure to adapt to technical changes to the role, provided the company has first offered an adaptation course and at least two months have passed since the change.
- Economic, technical, organisational or production grounds that do not reach the thresholds for collective dismissal.
It is worth remembering that the ground for objective dismissal based on justified absences (the former article 52.d) was repealed in 2020: it is no longer possible to dismiss someone for accumulating justified sick leave.
Procedure and severance pay
Objective dismissal requires communication in writing, 15 days’ notice and making available to the employee severance pay of 20 days’ salary per year worked, up to a maximum of 12 monthly payments. If the procedure is not followed or the grounds are not proven, the dismissal may be declared unfair, with the same 33-day compensation as in disciplinary dismissal.
Collective dismissal (ERE)
Collective dismissal, known as an ERE de extinción (a collective redundancy procedure), affects several employees at once on economic, technical, organisational or production grounds. It is considered collective when, over a period of 90 days, it affects:
- At least 10 employees in companies with fewer than 100 employees.
- 10% of the workforce in companies with between 100 and 300 employees.
- At least 30 employees in companies with more than 300 employees.
Procedure
The ERE requires opening a consultation period with the workers’ legal representatives, lasting a maximum of 30 days (15 in companies with fewer than 50 employees), and notifying the labour authority. The minimum severance pay is the same as in objective dismissal: 20 days’ salary per year worked, capped at 12 monthly payments, although it is usually negotiated upwards during the consultations.
Summary of severance pay
| Type of dismissal | Severance pay |
|---|---|
| Fair disciplinary | No severance pay |
| Fair objective | 20 days/year (max. 12 monthly payments) |
| Collective (ERE) | 20 days/year (max. 12 monthly payments) |
| Unfair | 33 days/year (max. 24 monthly payments) |
| Null | Reinstatement + back pay during proceedings |
How to avoid mistakes (and penalties) when dismissing
Most dismissals declared unfair do not fail on the substance, but on the procedure and lack of evidence: badly drafted letters, missing notice periods, miscalculated severance pay or a lack of documentation to support the grounds. Keeping each employee’s employment history organised and accessible makes all the difference when you have to justify a decision.
A good HR management software helps you keep contracts, communications, leave and time records centralised and traceable. And if the conflict stems from time tracking, having reliable digital clock-in records avoids disputes over lateness or excessive absences.
In any case, before carrying out a dismissal of any complexity it is advisable to seek employment law advice: a timely consultation costs far less than compensation for an unfair dismissal.