The curse of the employee 50 is a concept that has been much talked about in recent years. It refers to the increase of obligations, not only bureaucratic, that a company acquires by the mere fact of hiring that last employee.
The curious thing is that it is not due to a question of costs or marginal productivities, but it is found in a legislation that obliges them to assume a series of obligations. Both of labour, fiscal and accounting nature as well.
That number from which the companies lose their category of microenterprises, and become medium-sized companies.
And it is for that reason, that not few companies discard to take that step.
Because it might seem that there is no interest in business growth, nor is there any desire to increase the average size of companies in Spain.
Taking into account that SMEs represent more than 99% of the companies, 90% of which are considered micro or small with less than 10 employees. 66% of the Gross Domestic Product (GDP) and nearly 75% of employment.
The curse of the employee 50
In 2017, the Ministry of Economy put the number of regulations impeding business growth at 130, with a view to reforming them in the future. This has not happened. And this may partly explain the high mortality of companies in Spain, 9%-10%. Higher in any case than our “neighbors”. Or that, on average in Spain, a company has 4 employees, while in Europe there are 6.
Let’s see what are some of these additional obligations by subject. At least the most relevant and/or burdensome ones that explain what is known as the curse of the employee 50.
Additional labour obligations
These are broadly additional to those that apply to all companies regardless of their size.
Quota for the reservation of jobs for people with disabilities
Firstly, it should be noted that all those companies that reach the threshold of fifty employees are obliged to have at least 2% of workers with disabilities employed (art. 42 of Royal Legislative Decree 1/2013, of November 29).
This percentage is equivalent to one worker with a disability for every fifty workers, which will make it necessary to update this number according to the variations in the workforce that may occur.
The following are considered disabled workers:
- Those with a recognized disability equal to or greater than 33 percent.
- Workers with permanent total, absolute or severe disability pensions.
Regarding the calculation of the number of workers, the reference period of the immediately preceding 12 months must be taken into account, which will result in an average taking into account all the company’s work centers (including part-time workers).
Workers with temporary contracts of less than one year and discontinuous permanent employees will be computed according to the number of days worked. Every 200 days worked or fraction thereof will be counted as one more worker.
Finally, it should be noted that companies may use any type of contract to cover the reserve percentage.
Equality plan
As from the entry into force of Royal Decree-Law 6/2019, companies with more than fifty workers and up to one hundred workers will be obliged to draw up and implement an equality plan. For companies with more than fifty employees, such obligation came into force on March 7, 2022.
Failure to correctly carry out the equality plan or to implement it constitutes a serious or, as the case may be, very serious offense, and may be subject to sanction by the Labor Inspectorate.
Legal representation of workers. Works Council
On the other hand, employees of companies or centers with fifty or more employees may set up a Works Committee as a representative body of the employees. Said Committee will act as a representative and collegiate body for the defense of the workers’ interests. In the case of companies with fifty or more workers, the Committee shall be formed by a minimum of five workers.
Prior to such constitution, it will be necessary to promote elections in the work center in question. Likewise, this Committee will have the right to be informed and consulted by the employer on a series of issues that may affect the workers.
Health and Safety Committee
Another obligation of companies with more than fifty employees is the constitution of the Health and Safety Committee. This is a joint and collegiate body in charge of protecting the health of workers in their workplace.
This Committee will be made up of prevention delegates and the employer and/or his representatives, in a number equal to that of the prevention delegates.
The prevention delegates are those representatives of the workers (of the Committee, in this case) who have specific functions regarding the prevention of occupational hazards.
For companies with more than 50 workers (and up to 100), they must have 2 prevention delegates and 4 members of the Health and Safety Committee.
Collective dismissal
Finally, in the case of carrying out a collective dismissal, we must highlight two main obligations that companies with more than fifty employees must comply with:
Duration of the consultation period. If the company with fifty or more employees carries out a collective dismissal, the duration of the consultation period will be a maximum of thirty calendar days.
External outplacement plan: In addition to the above, the company must offer the workers affected by the collective dismissal an external outplacement plan through authorized outplacement companies. This plan will cover a minimum period of six months and must include training and professional orientation measures, personalized attention to the affected worker and an active search for employment.
Tax and accounting obligations
In addition to the above, let’s name these other obligations included in this so-called curse of the employee 50.
VAT declarations
To make VAT payments on a monthly and not quarterly basis. Because although it does not depend directly on the number of employees, it is foreseeable that the turnover exceeds 6.010.121,04€. And with this, the company will have to file its VAT returns and withholdings monthly instead of quarterly.
And in this case, it means that it will enter the Immediate Information Supply (SII) system. A great bureaucratic burden, having to inform the AEAT of all invoices issued and received within 4 days.
In addition, they are no longer able to present the accounts in abbreviated format. If there are at least two of the following three circumstances: an asset exceeding 4 million, a net turnover exceeding 8 million… and again exceeding 50 employees.
Audit of accounts
It appears the obligation to audit their accounts. With the consequent additional cost for these companies, which, in many cases, are characterized by having scarce resources.
This is the case if at least two of the following three requirements are met for two years: assets of more than 2.85 million, net turnover of more than 5.7 million and a workforce of more than 50 employees.
Loss of tax incentives
Obligation to pay monthly income tax withholdings.
Loss of deductions in the Corporate Income Tax for the indefinite hiring of unemployed people (Law 27/2014, art. 37).
And this is so because we have a legislation very overturned in the creation of companies, but not in their development and growth.
Other accounting obligations
Obligation to present a Statement of Cash Flows, a Statement of Changes in Net Equity, detail in the Accounting such items as Goodwill, Bonds given and received, Derivatives and Financial Guarantees, among others.
