This piece examines a set of secondary outcomes from labor reform. The shift to permanent contracts by default reduced the use of temporary employment and, for many workers, improved overall conditions. Yet it also introduced new challenges for employers when restructuring staff or terminating an employee. What used to be resolved by allowing a temporary contract to end now often winds up in a formal process that can heighten conflicts at the outset of a dismissal.
A friction point emerges as disputes move through mediation, arbitration, and conciliation services—collectively known as SMAC—as well as social courts. Data from the first half of this year show a clear uptick in cases reaching these venues, reflecting a broader because of the reform in hiring practices and dispute resolution pathways.
In one key metric, dismissal agreements filed in the first half of the year reached 5,995 in the province, a 32.6% rise over the same period in 2022. This information comes from the Ministry of Labor and Social Economy and the Department of Education, Universities and Employment. The body overseeing these matters becomes the first destination for workers who do not accept the company’s stated reasons for contract termination, making it a strong indicator of the labor market climate.
Regional insights in Alicante show that, of the total cases processed, 3,115 ended in settlements, representing a 35% increase from the previous year. Others, 1,193, concluded without a deal (a 51% increase); 1,385 were closed as ineffective when some participants, typically the company, failed to attend; and 302 cases were withdrawn or deemed not to have been submitted for various reasons.
Maria Antonia Olivadoes, president of the Alicante Social Graduate College, notes that the rise in mediation requests aligns with legislative changes. She explains that the only viable route to ending a permanent employment relationship is through dismissal, and with the workforce reform, this approach has become the default for hiring. She also recalls that many companies previously used temporary hires to adjust to workload fluctuations, but the new framework adds complexity to that strategy.
Lower compensation
Oliva also observes that workers frequently turn to SMAC to prevent severance pay from being taxed prematurely on their income tax returns. Without a SMAC decision, the tax authority may interpret an agreed severance as an early withdrawal, affecting the filing.
Remarkable data show a decline in the average severance amount negotiated through SMAC: the average fell from 10,818 euros per worker last year to 9,134 euros in the first half of this year. The decline hints at a growing share of workers with shorter tenures facing layoffs. Statistics from the Consell indicate that up to 5% of SMAC participants in the first half had less than one year with their employer, while about 68% had between one and five years of service.
Elche’s SMAC archives illustrate the trend, with the increase in conciliation requests, often resulting in no agreement or no attendance by the company, prompting more workers to seek court relief after the SMAC stage. In the first period, roughly 2,826 dismissal-related cases were filed nationwide, a 37.3% rise and the highest level since 2009, according to the General Assembly of the Judiciary. The housing market downturn and related workforce reductions are linked to these peaks in court activity.
Another question arises: is the rising layoff activity a sign of cheaper labor costs or a real shift in risk for employers? Juan Angel Torregrosa, who heads the CC OO work office in L’Alacantí, acknowledges the reform’s impact on layoffs but emphasizes that the change improves outcomes for affected workers, since severance pay tends to be higher for those dismissed than for workers who accept temporary terminations. He also notes that insecurity remains high when tenure is short, and the practice of terminating a larger number of short-tenured workers may appear cost-effective but carries broader consequences for morale and stability.
Into October, Alicante saw 3,443 new jobs created, while 1,294 remained unemployed, a snapshot that underscores a complicated labor market regardless of reform. Yolanda Diaz, the UGT secretary for the L’Alacantí-La Marina region, reminds that a priority for any new government is boosting protections to prevent exploitation and to balance the costs of layoff decisions.
Meanwhile, CEV notes that hiring methods are just one factor behind the rise in layoffs. They stress that any proposed changes touch many areas, and they argue that dismissal costs in the country are already among the highest in Europe, a dynamic that may influence future compensation policies. Separately, total demand for settlements grew by 78% in the first half of the year, reflecting more aggressive pursuits of unpaid sums by workers. SMAC recorded 2,436 requests for settlements in this area; this figure is up 78% from the previous year. In less than 6% of cases did mediation yield an agreement requiring collection, while the average paid to employees stood at about 2,126 euros. The courts saw 2,293 cases filed, up 44% from the year before.