Dismissing an employee on a permanent contract is one of the most sensitive employment decisions any company can make. It is not enough simply to want to end the employment relationship: the company must choose the right type of dismissal, prepare the documentation, calculate the cost, check whether the employee is in a protected situation and deliver a technically sound dismissal letter. A mistake can turn what appeared to be a controlled exit into an expensive, lengthy and reputationally uncomfortable legal dispute.
At MGI Àmbit, a firm of lawyers and economists in Barcelona specialising in employment law advice for companies, we help businesses, HR departments and executives prepare dismissals of employees on permanent contracts with legal rigour, financial perspective and risk control. The goal is not to dismiss quickly, but to dismiss correctly: with proper grounds, documentation and a strategy tailored to the specific case.
Quick summary
- Yes, an employee on a permanent contract can be dismissed, but there must be an appropriate legal route: disciplinary, objective, collective or negotiated.
- Disciplinary dismissal requires serious and culpable misconduct by the employee and carries no severance pay if it is declared lawful.
- Dismissal on objective grounds requires economic, technical, organisational, production-related or another legally recognised ground, a written letter, notice and severance pay of 20 days per year worked.
- If the grounds are weak or the formalities are not followed, the dismissal may ultimately be declared unfair.
- If the dismissal affects a protected employee or infringes fundamental rights, there may be a risk of the dismissal being declared null and void, with mandatory reinstatement.
- Before delivering the dismissal letter, it is advisable to review the employment contract, collective bargaining agreement, seniority, regulatory salary, evidence, personal circumstances and collective dismissal thresholds.
Can an employee on a permanent contract be dismissed?
Yes. A permanent contract does not mean that an employee cannot be dismissed or that the company cannot terminate the employment relationship. It means that the relationship has no agreed end date and, therefore, the company must justify the termination on legal grounds or assume the financial and legal consequences of a poorly handled decision.
In Spain, a company should not approach the dismissal of a permanent employee as a simple administrative communication. It is a decision with employment, financial and procedural consequences. Therefore, before taking action, one key question should be answered: which type of dismissal actually fits the case?
The three main routes the company should consider
| Exit route |
When it is used |
Main risk |
| Disciplinary dismissal |
When there is serious and culpable misconduct: absenteeism, disobedience, breach of trust, deliberate underperformance, harassment or other grounds. |
Being unable to prove the facts or failing to comply with formal requirements such as the dismissal letter, collective agreement or prior hearing. |
| Dismissal on objective grounds |
When there are economic, technical, organisational or production-related grounds, subsequent incapacity to perform the role or other legal grounds. |
Failing to sufficiently substantiate the grounds, incorrectly calculating severance pay or failing to comply with the notice requirement. |
| Negotiated exit |
When the company wants to minimise conflict and both parties are willing to reach an agreement. |
Drafting an unclear agreement, failing to settle amounts correctly or creating issues relating to unemployment benefits or the final settlement. |
Do you need to dismiss an employee on a permanent contract and want to avoid mistakes in the dismissal letter, severance pay or procedure? At MGI Àmbit, we analyse your case before you make the decision in order to reduce the risk of the dismissal being declared unfair or null and void.
First step: do not draft the dismissal letter without a prior assessment
One of the most common mistakes is to start with the dismissal letter. The letter is the final document, not the first. Before drafting it, the company should carry out a full employment-law assessment to determine whether there are valid grounds, what evidence is available, what the termination will cost and what risks may arise if the employee challenges it.
Information an employment adviser needs before recommending a strategy
- Employment contract and signed appendices.
- Employee’s exact seniority and professional category.
- Applicable collective bargaining agreement.
- Annual gross salary, variable remuneration, bonuses, benefits in kind and extra salary payments.
- Recent payslips and employment history where necessary.
- Disciplinary record, warnings, sanctions or previous communications.
- Documentary evidence of the facts: emails, records, reports, statements, witnesses or metrics.
- Protected personal situation: pregnancy, reduced working hours, sick leave, leave entitlements, employee representation, previous claims or internal complaints.
- Possible recent or planned dismissals to determine whether collective dismissal thresholds may be exceeded.
- Business objective: immediate exit, negotiated exit, restructuring, replacement of the position or cost savings.
With this information, it is possible to decide whether disciplinary dismissal, dismissal on objective grounds, prior negotiation or even a less risky alternative measure is appropriate. Dismissing an employee without this analysis is effectively acting blindly.
Disciplinary dismissal of an employee on a permanent contract
Disciplinary dismissal is used when the company considers that the employee has committed serious and culpable misconduct. It is the most forceful route because, if the dismissal is declared lawful, there is no obligation to pay severance compensation. Precisely for this reason, the courts require solid evidence and a highly specific dismissal letter.
Common grounds for disciplinary dismissal
The most frequent grounds include repeated and unjustified absences or lateness, disobedience, verbal or physical abuse, breach of contractual good faith, abuse of trust, continued and deliberate reduction in performance, alcohol or drug abuse affecting work, and certain forms of harassment.
However, merely naming a generic ground is not enough. The company must describe specific facts: dates, conduct, consequences, previous warnings, available evidence and the relationship between the misconduct and the seriousness of the measure. A vague letter can undermine a dismissal even when the company internally believes that it is justified.
Prior hearing before a disciplinary dismissal
In current disciplinary dismissal procedures, companies must exercise particular caution regarding the prior hearing. Recent Spanish Supreme Court case law has reinforced the need for employees to be given an opportunity to defend themselves against the allegations before the company makes the final decision to dismiss them.
In practice, this means communicating the alleged facts, allowing a reasonable period for submissions, reviewing the employee’s response and only then deciding whether dismissal is appropriate. It should not be treated as an empty formality, but as a genuine stage of the procedure.
Dismissal on objective grounds of an employee on a permanent contract
Dismissal on objective grounds is used when the reason is not culpable misconduct by the employee but an objective reason connected to the position, the company or its organisation. It is common in restructurings, decreases in activity, production changes, losses, internal reorganisations or the elimination of functions.
Basic requirements for dismissal on objective grounds
| Requirement |
What the company must do |
Common mistake |
| Written letter |
Clearly explain the grounds and why they affect the specific position. |
Using generic phrases such as “internal restructuring” without data or a connection to the position. |
| Severance pay |
Make available 20 days’ salary per year worked, capped at 12 monthly payments. |
Incorrectly calculating the regulatory salary or failing to include relevant salary items. |
| Notice |
Provide 15 days’ notice or pay compensation for the notice period not provided. |
Forgetting the notice requirement or failing to reflect its compensation correctly. |
| Documentation |
Provide reports, financial data, organisational charts or evidence demonstrating the need to eliminate the position. |
Failing to prepare the evidence until a claim has already been filed. |
The most sensitive point is usually the connection between the grounds and the affected employee. It is not enough to demonstrate that the company is experiencing difficulties or wishes to reorganise: it must justify why that particular position is being eliminated rather than another one.
Unfair dismissal: what happens if the grounds cannot be proven
A dismissal may be declared unfair when the company fails to prove the alleged grounds or fails to comply with essential formal requirements. In that situation, the company will normally have to choose between reinstating the employee or paying the corresponding statutory compensation.
The general reference for compensation for unfair dismissal is 33 days’ salary per year worked, capped at 24 monthly payments. For employees whose seniority predates February 2012, transitional rules may apply requiring an earlier period to be calculated according to different criteria, so each individual case should be reviewed.
When a negotiated exit may be worth considering
When the grounds are debatable, the evidence is weak or the employee may be in a particularly sensitive situation, many companies prefer to explore a negotiated exit. It is not always the cheapest route, but it may be the most efficient if it avoids litigation, reduces uncertainty and allows the employment relationship to end in an orderly manner.
The negotiation must be handled carefully. The amounts, concepts, exit date, final settlement, outstanding holiday, documentation to be delivered and settlement formula should all be clearly defined. Poor drafting can lead to subsequent claims.
Before delivering a dismissal letter, check whether you have valid grounds, sufficient evidence and an accurate calculation. At MGI Àmbit, we help you decide on the safest route: disciplinary dismissal, dismissal on objective grounds or a negotiated exit.
When a dismissal may be declared null and void
The greatest risk for the company is not always an unfair dismissal. In some cases, the real problem is the nullity of the dismissal. If a court declares the dismissal null and void, the consequence is not simply the payment of compensation: the company must reinstate the employee and pay the salary they should have received during the relevant period.
Particularly sensitive situations before dismissing an employee
| Employee’s situation |
Risk |
What to review before acting |
| Pregnancy, childbirth, adoption, breastfeeding or parental leave |
High risk of nullity if there are no valid grounds unrelated to that situation. |
Real reason for the dismissal, objective evidence and specific connection to the position. |
| Reduced working hours, work-life balance leave or leave of absence for care purposes |
Risk that the dismissal may be interpreted as retaliation or discrimination. |
Dates, previous communications, selection criteria and alternatives. |
| Legal or trade union representative |
Additional formalities and priority of retention in certain circumstances. |
Adversarial disciplinary proceedings, collective agreement, communications and representation rights. |
| Sick leave or previous claims |
Risk if there is a connection with discrimination, retaliation or infringement of rights. |
Real grounds, documentary history and criteria applied to other employees. |
| Internal complaints, grievances or previous disputes |
Possible allegation of protection against retaliation. |
Timeline, communications and evidence of an independent ground. |
If the employee is in a protected situation, this does not mean that the company can never dismiss them. It means that the grounds must be particularly well substantiated and completely unrelated to the protected situation.
How to properly prepare a dismissal step by step
A company that needs to dismiss an employee on a permanent contract must act methodically. Improvisation is often the reason why dismissals are successfully challenged.
1. Analyse the real grounds
The first step is to identify why the company wants to terminate the contract. Has the employee committed misconduct? Is there deliberate underperformance? Is there a genuine reorganisation? Does the company need to eliminate the position? Is it simply seeking to replace the person? The answer determines the entire strategy.
2. Review the contract, collective agreement and professional category
The permanent employment contract, collective bargaining agreement and professional category determine rights, obligations, possible additional formalities and the regulatory salary. In some sectors, the collective agreement requires specific procedures before sanctions or dismissals can be imposed.
3. Check whether there is a protected situation
Before dismissing an employee, the company must check whether they are pregnant, working reduced hours, taking leave, on a leave of absence, on sick leave, acting as an employee representative or have previously submitted claims. This analysis is essential for assessing the risk of the dismissal being declared null and void.
4. Gather evidence
The evidence must exist before the dismissal letter is delivered. Emails, reports, disciplinary records, time records, communications, performance comparisons, organisational charts or financial documentation must be organised and consistent with the alleged grounds.
5. Calculate severance pay and the final settlement
The regulatory salary, seniority, outstanding holiday, extra salary payments, accrued variable remuneration, severance pay where applicable and final settlement must be calculated. A calculation error can generate a dispute even if the underlying dismissal is defensible.
6. Draft a precise dismissal letter
The dismissal letter defines the scope of the subsequent legal dispute. What is not properly explained in the letter may be difficult to introduce later. It must therefore be specific, structured, coherent and adapted to the type of dismissal chosen.
7. Deliver the documentation correctly
Evidence of delivery must be retained. If the employee refuses to sign, this should be documented. The final settlement, company certificate and the necessary communications to Social Security and, where applicable, employee representatives must also be prepared.
Common mistakes when dismissing an employee on a permanent contract
Many employment disputes are not lost because the company had no grounds at all, but because it handled the dismissal incorrectly. These are the most common mistakes:
- Drafting a generic letter without specific facts.
- Failing to review the applicable collective bargaining agreement.
- Carrying out a disciplinary dismissal without a prior hearing.
- Incorrectly calculating the regulatory salary.
- Failing to check whether the employee is in a protected situation.
- Using disciplinary dismissal when there is actually an organisational ground.
- Claiming economic grounds without sufficient documentation.
- Failing to assess whether several dismissals may exceed collective dismissal thresholds.
- Failing to prepare evidence until the conciliation application arrives.
- Signing exit agreements without properly settling the final payment, severance compensation and legal effects.
Company checklist before dismissing a permanent employee
| Question |
Why it matters |
Risk if ignored |
| Are the grounds disciplinary, objective or negotiated? |
This determines the requirements, cost and strategy. |
Poorly focused dismissal letter and an unfair dismissal finding. |
| Is there sufficient evidence? |
The company will have to prove the facts or grounds. |
Unfair dismissal due to lack of evidence. |
| Does the employee have special protection? |
This may increase the risk of nullity. |
Mandatory reinstatement and back pay. |
| Does the collective agreement require any specific procedure? |
Some agreements impose additional formalities or rules on grading misconduct. |
Formal defect in the dismissal. |
| Has the severance pay been calculated correctly? |
The calculation depends on salary, seniority and the type of dismissal. |
Financial claims and loss of trust. |
| Are further dismissals planned? |
This may require an assessment of collective dismissal thresholds. |
Nullity due to artificial splitting or circumvention of the law. |
How much does it cost to dismiss an employee on a permanent contract?
The cost depends on the route used and the final legal classification of the dismissal. A lawful disciplinary dismissal is not the same as a lawful dismissal on objective grounds, an unfair dismissal or a null and void dismissal.
| Outcome |
Typical financial consequence |
Practical comment |
| Lawful disciplinary dismissal |
No severance compensation, but outstanding amounts must be included in the final settlement. |
Requires clear evidence of serious and culpable misconduct. |
| Lawful dismissal on objective grounds |
20 days per year worked, capped at 12 monthly payments, plus the final settlement. |
Must comply with the grounds, dismissal letter, severance payment and notice requirements. |
| Unfair dismissal |
33 days per year worked, capped at 24 monthly payments, subject to transitional rules. |
May result from insufficient grounds or formal defects. |
| Null and void dismissal |
Reinstatement, back pay and possible additional compensation. |
This is the highest-risk scenario for the company. |
For this reason, before making the decision, it is advisable to prepare a scenario analysis: the cost if the dismissal is upheld, the cost if it is declared unfair and the cost if there is a risk of nullity. This comparison enables decisions to be made on financial and legal criteria rather than purely emotional ones.
A poorly prepared dismissal can be far more expensive than a prior review. At MGI Àmbit, we calculate the cost, review the documentation and prepare the safest employment strategy for your company.
What happens if the employee challenges the dismissal?
The employee may challenge the dismissal within the statutory time limit. The process normally begins with a conciliation application and, if no agreement is reached, continues with a claim before the Labour Court. From the company’s perspective, the key is to have prepared the case file before the dismissal, not afterwards.
What the court will review
The court will analyse the dismissal letter, the alleged grounds, the available evidence, compliance with the formal procedure and the possible infringement of fundamental rights. In a dismissal on objective grounds, it will examine whether the grounds actually exist and whether they justify the termination of that specific position. In a disciplinary dismissal, it will examine whether the events occurred, whether they were serious, whether the employee was culpable and whether dismissal was a proportionate sanction.
When should an employment adviser become involved?
The involvement of an employment adviser should not be limited to calculating severance pay or processing the employee’s deregistration from Social Security. In the dismissal of an employee on a permanent contract, the real value lies in anticipating the dispute, organising the evidence and designing the strategy.
Cases where it is advisable to seek help before acting
- The employee has significant seniority and the potential cost is high.
- The employee is on sick leave, pregnant, working reduced hours, taking leave or has submitted previous claims.
- The company wants to rely on underperformance but has no clear metrics.
- There are economic or organisational grounds, but the documentation has not been prepared.
- The employee is a legal or trade union representative or holds a particularly sensitive position.
- Other dismissals have taken place or are planned within the next 90 days.
- The company wants to negotiate an agreed exit without creating future problems.
How MGI Àmbit helps companies that need to dismiss an employee on a permanent contract
At MGI Àmbit, we support companies in Barcelona and throughout Spain in the preparation, implementation and defence of individual dismissals. Our approach combines employment advice, legal review, financial calculations and practical negotiation strategy.
We can help you assess the viability of the dismissal, choose the appropriate route, prepare the dismissal letter, calculate severance pay and the final settlement, organise the evidence, review the collective bargaining agreement, design a negotiated exit or defend the company if the employee files a conciliation application or court claim.
Conclusion: dismissing a permanent employee requires strategy, not improvisation
Dismissing an employee on a permanent contract is possible, but handling it incorrectly can turn a necessary business decision into a much larger employment problem. The key is not to rush: first analyse the grounds, then assess the risk, calculate the cost, prepare the evidence and finally implement the decision with a solid dismissal letter and the correct procedure.
If your company needs to dismiss an employee on a permanent contract, seeking advice in advance can make the difference between an orderly exit and a costly dispute. At MGI Àmbit, we help you make the decision with security, rigour and a business-focused perspective.
Contact MGI Àmbit, employment advisers for companies in Barcelona
MGI Àmbit is a Barcelona-based firm of lawyers and economists specialising in employment, tax, accounting and legal advice for companies. Our employment team advises businesses on recruitment, payroll, restructurings, dismissals, disciplinary sanctions, employee relations and defence in employment disputes.
If you need help dismissing an employee on a permanent contract, contact MGI Àmbit before delivering the dismissal letter. We will analyse your case, review the documentation and advise you on the safest route to protect your company.
Do you need to dismiss an employee on a permanent contract? Avoid improvising. Speak to our employment team and prepare the dismissal with legal certainty from the very first step.
Frequently asked questions about dismissing an employee on a permanent contract
Can I dismiss an employee on a permanent contract without a reason?+
The company can terminate the contract, but if there are no genuine grounds or it cannot prove them, the dismissal may be declared unfair or even null and void if it affects fundamental rights or protected situations. It is therefore advisable to analyse the case before delivering the dismissal letter.
Which is better: dismissal on objective grounds or disciplinary dismissal?+
It depends on the grounds. Disciplinary dismissal is based on serious and culpable misconduct by the employee. Dismissal on objective grounds is based on economic, technical, organisational, production-related or other legal grounds. Using the wrong route increases the risk of losing the case.
How much does it cost to dismiss an employee on a permanent contract?+
It depends on the type of dismissal and its legal classification. A lawful dismissal on objective grounds entails 20 days per year, capped at 12 monthly payments. An unfair dismissal is normally calculated at 33 days per year, capped at 24 monthly payments. A lawful disciplinary dismissal does not generate severance pay, although a final settlement is still due.
What documents do I need to prepare a dismissal?+
It is advisable to gather the employment contract, collective agreement, payslips, seniority, professional category, annual salary, previous communications, evidence of the facts, previous sanctions, economic or organisational documentation and any information concerning protected circumstances affecting the employee.
What happens if the employee is on sick leave?+
Sick leave requires particular caution. It does not mean that the employee can never be dismissed, but if the decision is connected to illness, disability or retaliation, there may be a risk of the dismissal being declared null and void. It is essential to demonstrate genuine grounds unrelated to the sick leave.
Do I need to conduct a prior hearing before a disciplinary dismissal?+
Following recent Spanish Supreme Court case law, it is highly advisable to conduct a prior hearing so that the employee can defend themselves against the allegations before the final decision is made. The applicable collective agreement should also always be reviewed to determine whether additional procedures are required.
How long does the employee have to make a claim?+
The general time limit for challenging a dismissal is 20 working days. Filing the conciliation application suspends the running of the time limit, but the company should be prepared from the outset to defend the grounds stated in the dismissal letter.
Can MGI Àmbit prepare the dismissal letter?+
Yes. At MGI Àmbit, we review the documentation, calculate the cost, assess the risks, recommend the most appropriate route and prepare the dismissal letter or negotiation strategy so that the company can act with legal certainty.
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