Flexicurity with a guaranteed floor for Spain: a portable severance account for every worker

Spain is about to reopen the most sensitive rule in its labour law, the price of a dismissal. The pressure comes from Strasbourg. In 2024 the European Committee of Social Rights, ruling on a complaint by the UGT union, concluded that Spanish compensation for unfair dismissal breaches Article 24 of the European Social Charter: it is too low to repair the harm in every case and too low to deter employers. A second complaint, from CCOO, led to another decision, and on 17 June 2026 the Council of Europe's Committee of Ministers asked Spain for a legislative reform so that compensation reflects the real harm and courts can order reinstatement where that is the right remedy.

The government wants to act before the 2027 election. Employers want to stop it. This is exactly the kind of fight Anthony Giddens had in mind when he wrote The Third Way: security for workers and flexibility for firms, usually presented as a trade where one side loses. A radical-centre answer can give both sides more of what they actually need.

Where things stand

Today, compensation for an unfair dismissal is 33 days' pay per year worked, up to 24 months' pay, a rule generalised by the 2012 reform; the original Workers' Statute allowed up to 42 months. In July 2025 the Supreme Court ruled that judges cannot raise that amount on their own initiative, closing the route some regional courts had used to award extra compensation under the Charter.

According to reporting in June 2026, the Ministry of Labour's draft goes the other way. It would set a minimum floor a judge cannot reduce, raise the scale to 45 days a year with a 42-month cap, let judges add compensation for greater harm depending on age, gender, training or sector, bring back wages for the period of litigation, and let the worker, rather than the employer, decide whether to return when a dismissal is ruled unfair. The CEOE's president, Antonio Garamendi, says it threatens legal certainty. The draft needs a majority in Congress that the government does not obviously have.

Both sides have a point. A dismissal without cause that costs too little invites abuse, and the Council of Europe is right to say so. A dismissal whose cost depends on a judge's assessment of personal circumstances is hard for a small firm to plan for, and uncertainty about the cost of firing makes firms more cautious about hiring.

Two models from Europe

Austria solved half of this problem two decades ago. Under its Abfertigung Neu, which covers every employment contract that began from 2003, the employer pays 1.53% of the worker's gross monthly pay, from the second month, into an occupational severance fund. The money sits in an account in the worker's name. It grows continuously, it follows the worker from job to job (the "backpack" principle), and the law guarantees at least the contributions paid in. After three years of contributions, which can be added up across employers, the worker can draw it on dismissal, on the end of a fixed-term contract or by mutual agreement. If they resign, nothing is lost: the money stays invested. At the end it can be taken as cash, moved to the next employer's fund or turned into a pension.

Denmark solved the other half. Its flexicurity model, as the Danish government describes it, has three parts: employers can hire and fire without excessive dismissal costs; workers who pay into an unemployment insurance fund can receive up to two years of benefit; and the state runs education, retraining and counselling to get people back to work quickly.

Spain already has a piece of the Danish half. The 2024 reform of unemployment support created the complemento de apoyo al empleo, which lets people keep part of their benefit for up to 180 days after they take a job, so that accepting work never makes them poorer.

The proposal: flexicurity with a guaranteed floor

Spain should build a three-part settlement.

A severance account for every worker. Every employer pays a monthly contribution into a personal, portable severance account held by a regulated fund, with a legal capital guarantee, on the Austrian model. A rate close to Austria's 1.53% is a sensible starting point. The account pays out on any dismissal with a lawful cause and at the end of a temporary contract; the severance a firm owes for a lawful dismissal is paid from the account first, with the firm covering any shortfall during a transition period. If the worker resigns, the money stays theirs and keeps growing, and at retirement it becomes a pension top-up.

A separate deterrent for unfair dismissal. A dismissal that a court finds unfair costs extra, on top of the account. That penalty has a statutory floor that no judge can lower and a scale that firms can read in advance, and judges can add compensation for proven, specific harm within published bands. Where a dismissal is discriminatory or retaliatory, the worker chooses whether to return. This is how Spain meets the Council of Europe: the penalty for breaking the rules repairs and deters, and the cost of following them is known.

A guaranteed floor with a way back. Every unemployed person is covered by an income floor, with the complemento de apoyo al empleo extended so that taking any job always pays, and with retraining and placement services on the Danish model that start in the first weeks of unemployment. Giddens's principle of no rights without responsibilities applies in both directions: the unemployed person takes up help and offers, and firms whose dismissals are repeatedly ruled unfair pay a higher account contribution.

Why this works for both sides

The package keeps a left-wing commitment at its core: dismissal without cause carries a real deterrent and real repair, and nobody falls below a floor. It keeps a market-liberal one too: lawful dismissals have a predictable, pre-funded cost, small firms can plan, and workers can change jobs without losing a severance entitlement they built up over years. And it adds the idea that fits neither tradition, which Halstead and Lind put at the heart of radical centrism: protection that belongs to the person. A severance account in the worker's name, carried from job to job and turned into a pension at the end, is an asset, the kind of starting and continuing stake the radical centre wants every citizen to hold.

Spain is going to change its dismissal rules either way. The government and the unions can win a deterrent, the employers can win predictability, and every worker can come out of the negotiation owning something.