Financial services employment adviser: manage the complexity of a highly regulated workforce

Financial sector: the most regulated employment environment in Spain

Financial institutions — banks, savings banks, insurers, fund managers, investment services firms — operate in the most regulated employment environment in Spain. The Banking, Savings, and Insurance collective agreements are the most complex in the Spanish labour market, with historical remuneration structures, personal supplements, and acquired rights accumulated over decades.

On top of this sits an additional regulatory layer that does not exist in other sectors: EBA remuneration guidelines, CNMV circulars for investment services firms, and Bank of Spain internal governance requirements create a framework in which variable pay decisions must comply with both the collective agreement and prudential regulation.

Collective agreements in the financial sector: a complex landscape

The financial sector applies several collective agreements with distinct scopes: the Banking Collective Agreement (private banks), the Savings Bank Agreement (savings banks and banks derived from savings banks), the Insurance and Mutual Societies Agreement, the Insurance Mediation Agreement, and the Financial Credit Entities Agreement. Many large institutions also have company-level agreements that displace or supplement the sectoral agreement.

The coexistence of employees on different agreements — common in banking integration processes — creates complexity in harmonising conditions, occupational classification, and managing individually acquired more-favourable conditions.

Variable remuneration and regulatory supervision

Designing incentive and bonus plans for supervised entities must comply with EBA requirements: deferral, instruments linked to the entity’s value, malus and clawback provisions. We advise on designing these plans so that they comply with regulatory requirements whilst retaining their motivational effect for employees, and on communicating the remuneration policy to supervisors.

Collective redundancies in major institutions: union negotiation and risk management

Collective redundancies in the financial sector are some of the most complex employment processes in Spain. High average workforce seniority generates elevated severance costs; trade unions have extensive negotiating experience and a strong capacity for industrial action; and media coverage of any restructuring process in the sector adds a reputational pressure that must be managed.

We accompany institutions throughout the process: from designing the measure and preparing the economic justification to negotiating with trade union representatives and managing any subsequent individual litigation.

Fitness and propriety assessments and employment contracts for key function holders

Supervised financial entities must obtain prior regulatory approval (idoneidad, aptitud) for directors, senior management, and holders of key functions before appointment. The Bank of Spain, CNMV, and DGS each have their own assessment processes, timelines, and documentation requirements. BMC advises entities on structuring senior appointments to minimise the regulatory timeline risk — including the implications of conditional offers, notice periods, and garden leave arrangements for incoming executives whose regulatory clearance is pending.

Employment contracts for key function holders in regulated entities must address remuneration caps, clawback and malus provisions, non-compete clauses, and the interplay between contractual severance and regulatory obligations. In particular, the combination of a contractual severance entitlement and the European Banking Authority’s requirement that variable remuneration be subject to forfeiture in certain circumstances must be carefully balanced in the initial contract design.

Whistleblowing and internal investigations in the financial sector

Financial services firms have been subject to sector-specific whistleblowing channel obligations since before the general Law 2/2023: MiFID II, MAR, and Anti-Money Laundering directives all require independent reporting channels for regulatory breaches. Post Law 2/2023, these sector-specific obligations are supplemented by the general employment law whistleblowing requirements.

Internal investigations triggered by whistleblowing reports in financial institutions create specific employment law challenges: the rights of the subject of the investigation, the scope of the confidentiality obligation, the use of evidence obtained in regulatory investigations in subsequent employment disciplinary proceedings, and the rights of the whistleblower if they are themselves a current or former employee.

The 2022 labour reform impact on financial sector employment

The financial sector’s distinctive employment profile — high average seniority, sector collective agreements, and significant numbers of fixed-term contracts for project-based technology work — created specific challenges under the 2022 labour reform. Technology contractors engaged on a project basis through external firms must now demonstrate genuine service contractor status rather than disguised employment. Internal technology project teams previously covered by obra y servicio contracts must be reclassified.

BMC advises financial entities on mapping the post-reform employment compliance position across their full workforce, including direct employees, seconded employees, and contractor populations, and on designing a remediation roadmap that manages legal risk while preserving operational flexibility.

Remote and hybrid work in financial services: regulatory and employment intersection

Financial services firms face a unique tension between regulatory supervisory expectations and the post-pandemic expectation of hybrid working among financial sector employees. Regulators — particularly the Bank of Spain for supervised entities — expect senior management to be accessible and physically present for governance and supervisory meetings. Employment law, meanwhile, requires a documented remote working agreement for any employee working more than 30% of their time remotely.

For financial entities, the remote working agreement must be supplemented by a data security protocol covering the handling of client data and trading information outside the office, an acceptable use policy for personal devices, and a specific protocol for the recording obligations that apply to client communications under MiFID II. The remote working agreement cannot waive recording obligations — all client-related communications must be recorded regardless of whether the employee is in the office or working remotely.

BMC designs remote working frameworks for financial services firms that satisfy the regulatory requirements of the Bank of Spain, CNMV, and DGS while providing a workable and motivationally effective policy for employees.

Equal pay in financial services: audits and reporting

The Spanish financial sector faces specific scrutiny on gender pay equality due to historical pay differentials in the banking and insurance sectors. The pay audit (auditoría retributiva) required as part of the equality plan must analyse pay by professional group, gender, and type of employment contract, and identify any gap exceeding 25% that requires a documented correction plan.

For financial entities, the additional complexity is the interaction between base salary, variable remuneration (which typically represents a significant proportion of total compensation for revenue-generating roles), and non-salary benefits. The pay audit must examine total compensation — not just base salary — and apply the proportionality test to the variable element, which is subject to a different analytical framework than fixed pay.

CNMV-regulated entities also face transparency obligations under the CRD V Remuneration Disclosure framework — public disclosure of aggregate remuneration for identified staff (material risk takers) including a breakdown of fixed versus variable components. BMC ensures that internal pay audit findings are consistent with regulatory remuneration disclosures, avoiding any inconsistency that could attract supervisory attention.

Social Security for seconded and internationally mobile employees in financial services

The financial sector’s international talent model — secondments between EU branches, postings from London to Madrid or Frankfurt to Barcelona — creates complex Social Security and employment law compliance requirements that require specialist management.

Under EU Regulation 883/2004, an employee seconded from one EU member state to another retains coverage under the sending country’s Social Security system for up to 24 months (extendable to 5 years under a bilateral agreement). The employer must apply for an A1 certificate from the sending country’s Social Security authority before the secondment begins. Operating without an A1 certificate — which is common for short-term postings — exposes the employer to Social Security registration requirements and retroactive contribution demands in the host country.

Post-Brexit, the UK-Spain Social Security arrangement (which replaced Regulation 883/2004 for bilateral arrangements) applies different timelines and procedures. BMC advises financial institutions on the Social Security coordination framework for all bilateral arrangements involving Spain, ensuring that A1 certificates or equivalent are in place before secondments begin.

Bonus deferral and clawback: structuring compliant incentive plans

Variable remuneration in supervised financial entities must comply with EBA Guidelines on Sound Remuneration Policies and the specific requirements of the relevant sectoral regulation (CRD V for banks, Solvency II for insurers, MiFID II for investment firms). The core requirements for identified staff (material risk takers) include:

Deferral. At least 40-60% of the variable component (depending on the amount and the staff member’s seniority) must be deferred for 3-5 years. The deferred portion is subject to ex-post risk adjustment — meaning it can be reduced or eliminated if the risks underpinning the original award materialise during the deferral period.

Instrument component. At least 50% of the variable component (both upfront and deferred) must be paid in instruments — shares, convertible bonds, or equivalent instruments linked to the entity’s equity value. For non-listed entities, phantom shares or equity-linked instruments that track net asset value are common alternatives.

Malus and clawback. The plan must include malus provisions (reduction or cancellation of unvested deferred awards) and clawback provisions (recovery of already-paid variable compensation) in specified circumstances including regulatory sanction, financial restatement, or material misconduct. Clawback periods must extend to 7 years for senior management and risk takers at significant institutions.

Employment contracts for identified staff must document all of these provisions clearly and include the specific triggers for malus and clawback in a way that is legally enforceable under Spanish employment law. BMC designs compliant incentive plan documentation for financial entities, coordinates with the HR and remuneration committee, and advises on the employment law enforceability of clawback provisions in Spain’s employment court framework.