Companies prepare their escape from Spain due to costs and legal uncertainty

Inquiries to law firms multiply. Companies with the largest digital base look at China, Pakistan and India

After two and a half years of the pandemic and despite geopolitical instability, the shadow of relocations is once again hanging over the Spanish labor market. It also does so by breaking into key sectors of our GDP such as services, taking advantage of new technological tools.

While Spain presents its bid to become the main digital hub in southern Europe as a winning trick to attract companies, they are counting. And it does not seem that the advantages defended by the Government outweigh the costs and risks of creating employment in our country.

In recent months, inquiries from companies of all kinds, but especially those linked to the services sector , have been sent to the main law firms in our country, as confirmed to by sources in the sector.

The concerns of the companies are due to various factors, starting with the economic impact on the costs of the rise in taxes and contributions, which has aggravated the impact of inflation on their accounts. But neither does it help, in the labor field, the continuous declarations of the Government on wages, the increase in the cost of dismissal and the revision of compensation.

While companies are still trying to adapt to the new labor reform, the announcement that the Labor Minister, Yolanda Díaz, is going to initiate a new review of it, under the euphemism of ‘modernization of the Workers’ Statute’ , has been the spark that was missing to ignite a sense of legal insecurity that affects decision-making.

Added to this is that after the pandemic, establishing in countries with a much lower labor cost has become attractive again. But not only for the manufacture of products, but for the provision of all kinds of services thanks to the changes introduced by digitization.

And it is that new technologies pose a new paradigm for relocation. The paradigmatic example is the call center . If a few years ago, language was the main barrier not only to coordinate work teams, but also to communicate with clients, electronic communications and the digitization of processes have changed the landscape.

This explains why these types of services, which have undergone a profound transformation over the years, are the spearhead of this new business exodus that now points to China, Pakistan and India on the map .

The impact in terms of employment is not small: it must be taken into account that all types of companies, from the financial sector to elearning and, of course, logistics or electronic commerce, pivot on customer service and each one employs or outsource teams of tens to hundreds of people.

Social and digital dumping

But call centers are only part of the problem. And not the most worrying. In a context of open war for technological talent in Europe, the rise of nomadism means that Spaniards choose to work remotely for foreign companies.

A situation that is reminiscent of that experienced by the industry decades ago, when large manufacturers relocated production to Korea or China, but which is now affected because digitization makes it much easier to deal with these displacements .

This not only translates into a clear case of “social dumping” with respect to countries with worse working conditions and more lax legislation, but also leaves Spain out of the market in more and more sectors and services , according to experts.

The recipe to counteract is clear: offer high quality and specialized services that add value to the economy and, above all, cannot be easily relocated. This lack of alternatives for the Spanish economy makes it especially vulnerable to this evolution.

But while we continue to wait for these major structural reforms and the production model, what is going to cause in the short term is a flight of companies . 

The barriers to reform 

What will be its impact on employment? According to Borja González Elejabarrieta , director of Laboral de Gómez, Acebo & Pombo, that it is necessary to analyze “case by case”, since “from a legal point of view”, the “mere desire” to try to reduce production costs by itself would not justify the decision to close or restructure the subsidiary in Spain.

In addition, in order to proceed with the dismissal of all or part of the workforce, it is necessary that there be economic, productive, technical or organizational reasons “in the terms required by Spanish law”. At this point, what is regulated by the 2012 labor reform continues to prevail, since the one promoted in 2022 has not modified it, although it has reinforced alternatives such as ERTEs or the activation of the RED Mechanism.

Andersen’s labor director, Raquel de la Viña , recalls that the most common causes that force restructuring are economic and productive and organizational. ” The technological causes are the least common “, she recalls.

Likewise, collective dismissal processes are appraised and introduce the obligation for companies to offer an external relocation plan, with the corresponding cost .

In addition, in the case of dismissals of people over 50 years of age, it entails “additional obligations” such as contributions to the Public Treasury or the completion of a special Social Security agreement. ” All this, of course, adds cost to the restructuring “, explains de la Viña.

But the dissuasive effect can be neutralized by a horizon of legal changes that the Government wants to carry out in the final stretch of the Legislature. Calra de Díaz’s intention to make these obstacles even more expensive can speed up business processes and can have the counterproductive effect of speeding up decision-making.

“This constant change creates a legal insecurity that does not favor or encourage entrepreneurs or companies to stay or settle in the Spanish market ,” says De la Viña.

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