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ERE or ERTE: make the right call before you start the process

Expert advisory on Spain's ERE (collective dismissal) and ERTE (temporary employment regulation): when each applies, the RED Mechanism, negotiation with employee representatives, and employer obligations.

The problem

When a Spanish company faces economic, technical, organisational, or production difficulties that require reducing headcount or suspending employment contracts, Spanish labour law provides two main instruments: the ERE (Expediente de Regulacion de Empleo), which is a collective redundancy, and the ERTE (Expediente de Regulacion Temporal de Empleo), which is a temporary suspension or reduction of working hours. Choosing incorrectly between them — or initiating the process without experienced legal support — can be catastrophic. Courts have declared collective dismissals null and void for procedural defects or inadequate supporting documentation, triggering obligations to reinstate all affected employees and pay back wages for the entire period. Spanish labour procedure is highly formalistic: the consultation period with employee representatives, the documentation of the economic cause, and the individual notification letters all have specific requirements that cannot be improvised.

Our solution

BMC's [employment law](/en/legal/employment-law) team combines labour lawyers experienced in collective negotiation with financial advisors capable of building the robust causal documentation that the Labour Authority requires. We advise from the pre-filing decision stage — ERE vs ERTE vs alternatives — through drafting the initial communication, managing the consultation period negotiations, and, if the process is challenged, defending the company's position before the employment tribunal.

Process

How we do it

1

Diagnosis and choice of the correct instrument

We analyse the company's situation: financial figures, projections, the most appropriate grounds for the process (economic, technical, organisational, or productive), the number and selection criteria for affected employees, and whether less restrictive alternatives have been genuinely explored. We determine whether a collective redundancy (ERE), a temporary suspension (ERTE), the RED Mechanism, or other measures are most appropriate.

2

Causal documentation and initial communication

We prepare the explanatory memorandum of the grounds, the financial and operational supporting documentation, the list of affected employees with objective selection criteria, and the simultaneous notification to the employee representatives and the Labour Authority. The quality of this documentation is the single most important factor in withstanding a legal challenge.

3

Consultation period and negotiation

We coordinate and attend all consultation period meetings (minimum 15 days for companies with fewer than 50 employees; 30 days for larger companies). We develop a negotiation strategy aimed at reaching an agreement that protects the company's interests while being sustainable for both parties.

4

Closure and implementation

If an agreement is reached, we verify that its content is executable and does not waive statutory rights. We draft the individual redundancy or suspension notices, calculate the applicable severance payments, and coordinate with the HR department on execution. If no agreement is reached, we advise on the unilateral decision and anticipate the defence strategy for any subsequent legal challenge.

10+
Employees for collective redundancy in companies under 100
30
Minimum consultation days for companies with 50+ employees
20
Working days to challenge a redundancy before an employment court

We had to implement a 38-person redundancy at our Barcelona facility. BMC built the economic and organisational case methodically, managed the consultation period with confidence and professionalism, and we reached an agreement with the works council that the company could realistically honour. Not a single subsequent legal challenge.

Patricia Williams General Manager, Southern Europe, International manufacturing company

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ERE and ERTE: two instruments, one decision

Spain’s Workers’ Statute and the 2021 labour reform configure a labour flexibility system built around two main instruments. The ERE is for permanent reductions in headcount; the ERTE is for temporary suspensions or working-time reductions. Choosing between them is not merely a legal decision — it is a strategic one that shapes the company’s cost structure, its relationship with the workforce, and its exposure to legal risk.

An ERE that should have been an ERTE generates unnecessary severance costs. An ERTE that conceals a permanent situation will be successfully challenged by affected employees. Correctly characterising the company’s difficulties — and the likely duration of those difficulties — is the first critical step.

The four grounds for an ERE or ERTE

The Workers’ Statute requires that a collective process be based on one of four documented grounds:

  • Economic: The company has incurred losses for two consecutive quarters, or there are credible forecasts of losses that threaten the company’s viability or its capacity to maintain employment. Documented with audited accounts and financial projections.

  • Technical: Changes in the means or instruments of production have made certain job roles redundant. Common in technology-driven restructurings.

  • Organisational: Changes in work systems or methods justify a restructuring of the workforce. Often combined with technical grounds in digital transformation scenarios.

  • Productive: Changes in the demand for the company’s goods or services mean that existing staffing levels are no longer sustainable. Documented with market data, order books, and sales forecasts.

The quality of the causal documentation is the single most important factor in the legal resilience of the process. Courts examine this documentation closely when collective dismissals are challenged, and inadequate documentation is the most common reason for nullity rulings.

Managing the consultation period

The consultation period is the formal negotiation phase between the company and the employee representatives (works council or employee delegates). It is not simply a box-ticking exercise: the law requires genuine negotiation in good faith, and courts will look at the quality of the negotiation process — not just its outcome — when assessing whether a challenge should succeed.

At BMC, our strategy for the consultation period starts with a realistic assessment of what the company can offer and what the employee representatives are likely to accept given the documented economic situation. We have participated in over a hundred consultation periods across a range of sectors and sizes, and we know both the standard arguments and the points of flexibility that lead to workable agreements. We coordinate the consultation period with our litigation and dispute resolution team so that the entire process is prepared for both outcomes: agreement and non-agreement.

After the process: compliance obligations

Whether the process concludes with an agreement or a unilateral decision, the company’s obligations do not end at the last consultation meeting. For EREs, individual dismissal notices must be correctly drafted and timed. For ERTEs, Social Security notifications, the employment maintenance commitment, and regular reporting to the Labour Authority must all be managed. Our labour compliance service handles these post-process obligations so that the company does not inadvertently create new legal exposure after the main process has concluded.

FAQ

Frequently asked questions

An ERE (Expediente de Regulacion de Empleo) involves the definitive termination of employment contracts — in other words, a collective redundancy. Affected employees are entitled to severance pay of 20 days' salary per year of service, up to a maximum of 12 monthly payments, plus any improvements negotiated during the consultation period. An ERTE (Expediente de Regulacion Temporal de Empleo) involves the temporary suspension of contracts or reduction of working hours, with employees accessing unemployment benefit during the suspension. The correct choice depends on whether the company's difficulties are permanent or temporary in nature.
Under Article 51 of the Workers' Statute, a redundancy process qualifies as collective — and therefore requires the full ERE procedure — if it affects: at least 10 employees in companies with fewer than 100 workers; at least 10% of the workforce in companies between 100 and 300 employees; and at least 30 employees in companies with more than 300 workers. Below these thresholds, Article 52 objective dismissal procedures may be used — still requiring documented grounds but with a less complex process.
The Mecanismo de Flexibilidad y Estabilizacion del Empleo (RED Mechanism), introduced by the 2021 labour reform, is an extraordinary instrument that can be activated by the Council of Ministers in situations of cyclical economic crisis (cyclical modality) or where sectors require deep structural adaptation (sectoral modality). When active, companies can access ERTE with enhanced public funding conditions and Social Security contribution reductions. It is not available as a routine employer option — it requires prior government declaration and therefore cannot be planned for in advance.
Yes. Even when a collective redundancy agreement has been reached during the consultation period, individual employees can challenge their personal dismissal before the employment tribunal within 20 working days of receiving their individual redundancy notice. If the collective dismissal is later declared null and void — for example, due to procedural defects or insufficient causal documentation — all individual dismissals are automatically void, and the company is obliged to reinstate affected employees and pay back wages for the entire intervening period. This is why procedural compliance is so critical.
Companies that use an ERTE must maintain the employment of affected workers for a period of six months after the date of resumption of normal activity — unless the process agreement specifies different terms. Failure to comply with this employment maintenance commitment can require the company to repay Social Security contribution exemptions received during the ERTE. Detailed post-ERTE compliance obligations are managed by our [labour compliance](/en/legal/labor-compliance) team.

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