Madrid – The Spanish Confederation of Business organizations (CEOE) has withdrawn from negotiations with the government and labour unions regarding a potential reform of severance pay regulations, escalating tensions in ongoing labor discussions. The CEOE announced it’s decision on October 22, 2025, citing a lack of consensus on key proposals and concerns over the potential economic impact of changes to the current system.
The move throws into uncertainty government efforts to modernize Spain‘s labor laws, a key pledge in its coalition agreement. A reformed severance pay system is intended to address perceived imbalances between worker protections and business competitiveness, and its failure to materialize could hinder economic growth and investment.The negotiations centered on proposals to increase severance pay, currently set at 20 days’ salary per year worked with a maximum of 12 months, possibly impacting businesses across all sectors.
According to sources within the CEOE,the institution’s decision stems from disagreements over the scope and financial implications of proposed increases to severance pay. The CEOE maintains that significant increases would place an undue burden on companies, notably small and medium-sized enterprises (SMEs), and could discourage hiring.
“We have made a meaningful effort to engage constructively in these negotiations,but we cannot support proposals that we believe would harm the competitiveness of Spanish businesses,” a CEOE spokesperson stated.
The Spanish government and major labor unions expressed disappointment with the CEOE’s withdrawal. The Ministry of Labor indicated it would continue seeking dialog with other employer organizations to advance the reform. Unions have warned that the CEOE’s move could lead to increased labor conflict and a breakdown in social dialogue.
Spain’s current severance pay system has been a subject of debate for years. While providing a safety net for workers facing dismissal, critics argue it discourages companies from taking on new employees due to the high cost of potential layoffs. The government’s proposed reforms aimed to strike a balance between these competing concerns, but the CEOE’s departure complicates the path forward. The next steps remain unclear, but further negotiations-or potential legislative action-are anticipated in the coming weeks.
