There has been much debate about compensation for unfair dismissal in Spain in recent times. Although the Supreme Court has settled the issue in the light of existing legislation, a legislative initiative for its reform is under way.
Currently, for contracts signed after 12 February 2012, in accordance with article 56 of the Workers’ Statute, the compensation provided for unfair dismissal is calculated at the rate of 33 days of salary per year of service, with a maximum of 24 monthly payments.
However, possible legislative reforms are being discussed after the European Committee of Social Rights concluded that, in some cases, Spanish legal compensation may prove insufficient and would not meet the protection standards required by the European Social Charter (ESC).
Prior to this conclusion, in Spain, different labor courts and tribunals had awarded, in certain very specific cases, compensations higher than that provided for by law, based on the provisions of Article 24 of the ESC —which establishes that the signatories of the agreement undertake to recognize “the right of workers dismissed without valid reason to adequate compensation or other appropriate reparation”— and Article 10 of Convention No. 158 of the International Labor Organization (ILO) —which provides that if “the bodies referred to in Article 8 of this Convention find that termination is unjustified and if they are not empowered or do not find it practicable, in accordance with national law and practice, to declare the termination invalid and/or order or propose reinstatement of the worker, they shall be empowered to order payment of adequate compensation or such other relief as may be deemed appropriate”—.
To this end, they argued that, in certain circumstances (such as, for example, when the person had reduced length of service in the company that dismissed them; they had rejected previous job offers to accept the job from which they were dismissed; they are not entitled to public benefits; they have to incur relocation costs, etc.) the quantification of the damage suffered by the dismissal may be much higher than the compensation marked by law.
However, the Labor Chamber of the Supreme Court has issued two recent rulings in this regard, in which, after analysing the content of the ESC and ILO Convention No. 158, it makes it clear that the Spanish system of compensation for unfair dismissal is compatible with these international texts, also stressing the legal certainty provided by having a legally fixed calculation formula.
Specifically, in its most recent judgment, of 16 July 2025, the Supreme Court considers that the literal wording of Article 24 of the ESC, identical to Article 10 of ILO Convention No. 158, requires “adequate compensation or appropriate reparations in unjustified dismissals with reference to national legislation”, which is precisely what the national legislator has done by developing its content through Article 56.2 of the Workers’ Statute through a compensation system fixed and capped. In addition, it highlights, this objective determination of the amount of compensation has been constitutionally validated, and therefore there is no room for a displacement of the national rule.
This judgment ratifies the position maintained in the previous one, of December 19, 2024, although it includes two dissenting opinions of three magistrates who insist on the need that, in very specific and duly justified cases, complementary compensation could be awarded, subject to a rigorous exercise of evidence and motivation.
In this context, in September 2025, the Congress of Deputies approved a non-legislative proposal urging the Government to reform compensation for unfair dismissal. Specifically, the Congress urges the Government to adopt “the necessary measures so that Spanish legislation complies with the provisions of ratified international instruments, in particular the European Social Charter, in the interpretation made of it by the European Committee of Social Rights, and ILO Convention 158, regulating compensation in the event of unfair dismissal that is truly dissuasive and restorative”. For this reason, on 20 October 2025, the Ministry of Labor opened negotiations with the social partners on this possible reform.
In short, although the debate was settled by the Supreme Court, within the framework of current Spanish legislation, in the light of the non-legislative proposal approved by Congress, we may soon see legislative developments.
