ANNUAL HOLIDAYS/ VACATION LEAVE

Agreed individually or collectively, never less than 30 calendar days.

Holidays cannot be replaced by financial compensation. According to the General Labor Act, untaken vacations are definitely lost without any compensation in lieu. Nevertheless, since the employee has the right to enjoy such vacations, it is normally agreed between the parties an economical compensation.

Annual vacations

Annual vacations are 30 natural days (not working days). As an example, If the employee stars working on the 17th, the monthly holidays accrued are the result of 2,5*17/30.

When the legal minimum holidays cannot be taken, because the time of working for the company does not coincide with holidays, workers with casual or temporary contracts will receive the proportional part corresponding to the holidays together with their wages.

SALARY

Remuneration is established either through a National Collective Agreement or through the individual contract, respecting a legal minimum salary of € 540,90 gross per month established in the Labor Act.

This involves two fundamental concepts:

1. Basic pay

2. Fringe benefits.

The Employee must receive a fix salary and might receive a variable one in addition.

The latter might reward, inter alia, length of service, bonuses, profit-sharing, distance and transport bonuses, workplace bonuses (for difficulty, toxicity, hazardousness, shift work, night work, etc.), production bonuses for quality or quantity of work, maintenance, accommodation and residence in island provinces, Ceuta and Melilla, etc.

Workers can be entitled to at least two extra payments per annum: the amount is agreed by collective agreement or by individual agreement between the employer and the workers’ representative; one is usually paid at Christmas and the other in the month established by collective agreement or by agreement between the employer and the workers’ representative.

Extra payments also be paid on a monthly pro rata basis if agreed between the parties (salary paid in twelve installments).

Wage guarantee: an independent body (FOGASA) in connection with the Ministry of Labour and Social Affairs guarantees payment of wages to workers and compensation for dismissal or termination of the labour relationship, and wages outstanding as a result of the employer’s insolvency, temporary receivership, bankruptcy or arrangement with creditors.

Limits are applicable for any company including representative offices (RO), which might only perform preparatory or auxiliary activities (research, P.R., Business development analysis etc.), no sales, technical assistance, administrative services. This implies that the company cannot make sales in Spain. No national collective agreement are applicable to RO. Therefore, Labor Act regulations stating a minimum salary of 540,90 euros will be applicable for RO. The commissions could be legally consistent with the RO, if the sales do not proceed from Spain.

OVERTIME / HOURS PER YEAR

Their provision is voluntary, except in the case of an individual or collective agreement.

Overtime could be carried out by any employee. No restrictions apply for workers under 18 years old.

Individuals over 16 years old may work with the parent’s approval stated in the labor contract. Overtime may be remunerated or compensated for with equivalent paid rest time.

Workers may carry out a maximum of 80 overtime hours per year, which does not include overtime paid with rest time, nor work carried out to prevent or repair extraordinary and urgent damage; the latter is obligatory for the worker and must be paid as overtime. If the worker has working time calculated on an annual basis of less than the general working time in the company, the restriction on hours is reduced proportionally.

PAID LEAVES

Subject to notice and subsequent justification to the company, workers may take paid time off for some of the following reasons and for the following time:

The limits are established in the particular National Collective Agree-ments (NCA) and Labor Act. NCAs usually improve the limits estab-lished in the Labor Act, which are the following:

- Marriage, 15 calendar days.

- Birth of a child or death, accident or serious illness or hospitalisation of blood relations or relations by marriage up to the second degree, two calendar days or four if required to travel;

- Fulfilment of an unavoidable public duty.

- Women are entitled to one hour off work for breast-feeding a child under nine months of age, which can be divided into two parts or the working day may be reduced for the same purpose. This time off may be taken either by the mother or the father if they both work.

- Anyone who, because they are the legal guardian, is directly responsible for a young person under six years of age or a physi-cally or psychologically disabled or partially-sighted person or person with hearing difficulties who does not carry out paid work is entitled to a reduction in working time, with a proportional reduction in wages, of between at least one third and no more than half its duration.

- For the purposes of labour law, the performance of jury ser-vice is considered compliance with an unavoidable public and per-sonal duty.

- The time used by members of works committees and company representatives can be considered to be monthly time-off rights for the performance of their duties.

MATERNITY/ PATERNITY

Maternity / adoption allowances is forecasted as a legal coverage independently from the kind of social contribution area and contribution paid. comes corresponded to the workers integrated in whichever “previdenziale" regimen that enjoys the periods of rest post-delivery, in acceptance or adoption case.

A mandatory requirement is to have social contribution paid for at least 180 days in the last 5 years immediately before the birth/ adoption legal date. The maternity allowance is an amount equal to 100 % of the social contribution social.

Maternity and paternity: A woman’s employment may be suspended for maternity for 16 uninterrupted weeks, which may be extended by two weeks for multiple births for each child from the second child onwards. If the mother does not meet the qualifying conditions, the benefit is payable to the father for 6 fewer weeks.

For the adoption or foster care of a child under age 6 (or older if disabled and in other exceptional circumstances), benefit is payable for 16 weeks (plus 2 weeks for a second and subsequent adopted or fostered children). This period is distributed upon the discretion of the employee, provided that six weeks fall immediately subsequently to the birth date. If both parents are employed, the benefit can be shared between the mother and father and the leave period may also be taken on a part-time basis. The timing of the payment period can be adjusted in cases of premature birth and the extended hospitalization of the child.Independently from this mandatory post-birth time off for the mother, if both parents should work, also the father might opt to take a particular period off uninterruptedly after the birth date.

Adoption or fostering: in case of adoption or fostering, whether pre-adoptive or permanent, of children of up to six years of age, the time off will last for 16 uninterrupted weeks, extendable in the case of multiple adoption or fostering by two weeks for each child from the second child onwards.

Time off shall count, at the employee’s choice, either from the administrative or legal decision on fostering, or from the court judgment establishing adoption.

The duration of the time-off will also be 16 weeks in the case of adoption or fostering of children over six years of age when they are disabled or physically handicapped minors who, because of their personal circumstances and experience or because they come from another country, have special difficulties in integrating into social and family life, duly certified by the competent social services. When, in cases of international adoption, the parents previously have to travel to the country of origin of the adoptive child, the period of time off provided for each case may begin up to four weeks prior to the judgment establishing the adoption.

NATIONAL HOLIDAYS

These are fixed on an annual basis.

• They may not exceed 14 per year, two of which will be local. Christmas Day, New Year's Day, 1 May as Labour Day and 12 October as the Spanish National Day will in any event be respected as national public holidays.

• With regard to the holidays set down in the preceding paragraph, the government may transfer to Mondays all national public holidays that fall midweek, and any public holidays falling on a Sunday will in any event be transferred to the Monday immediately following.

Within the annual limit of 14 public holidays, the Autonomous Communities may set the public holidays which are traditionally their own, replacing those of national scope determined statutorily They may also opt to transfer those provided for in the previous paragraph to Mondays

WORKING HOURS

The maximum duration of ordinary working time is an average of 40 hours per week of actual work, calculated on an annual basis.

The actual number of ordinary working hours may never exceed ten per day.

Collective agreement or an agreement between the company and workers’ representatives could establish another distribution of daily working time, which should in any case improve the previous 10 hour limit and respect the rest time between working days.

Employees under 18 years of age may not do more than eight hours of actual work per day, including hours allotted to training where applicable, and if they work for various employers, those worked for each of them. Resting days per week will be 1.5 day.

By means of either a collective agreement or an agreement between the company and the workers’ representatives, working time may be distributed irregularly throughout the year, subject to respect for the minimum periods of daily and weekly rest.

A minimum of 12 hours must elapse between the end of one working day and the start of the following working day.

When the duration of the continuous working day exceeds six hours, a rest period of at least 15 minutes must be established during the day.

Workers are entitled to a minimum weekly rest time, of one-and-a-half uninterrupted days, which generally includes Saturday afternoon or, where applicable, Monday morning and the whole of Sunday.

Overtime may be remunerated or compensated for with equivalent paid rest time.

Workers may carry out a maximum of 80 overtime hours per year, which does not include overtime paid with rest time, nor work car-ried out to prevent or repair extraordinary and urgent damage; the latter is obligatory for the worker and must be paid as overtime.

If the worker has working time calculated on an annual basis of less than the general working time in the company, the restriction on hours is reduced proportionally.

EXTINCTION OF A CONTRACT

NOTICE PERIOD IN CASE OF TERMINATION :

A) redundancy / company reduction needs / job displacement: 30 days. The employee will have to be indemnify with 20 days per year worked;

B) disciplinary reasons not proved: no previous notice period exists. The employee will have to be indemnified with 45 days per year worked;

C) justified reason: if accepted by the labour court, no previous notice period or indemnity would exist.

This obligations are applicable to all companies, regardless the size or type of activity.

For companies with less than 6 employees the work risks prevention regulations can be covered in two ways:

• such prevention can be personally assumed by the em-ployer;

• contracting an external service.

This service is basically rendered by the Accident’s at Work Mutualities.

SICKNESS

Register for attendances, it mut be registered exclusively after the fourth day of illness. It is registered directly within the Social se-curity.

Sickness benefit

The first three sickness days will not be paid either by the company or Social Security.

From the day 4th to the 15th (inclusive), the company will pay 60% of the previous month social contribution base.

From the 16th day to the 20th, it will be paid by the Social Security or in its case the Mutual. From the day 21th it will be paid 75% it will be paid by the Social Security or in its case the Mutual.

The limit will be 18 months since the first sickness day.

PENSION

Old-age pension: Age 65 (age 64 if the position of the retiring worker is to be taken by a person registered as unemployed) with 15 years of contributions, including 2 years of contributions in the last 15 years. Retirement from employment is necessary.

The minimum pension at age 65 is € 540.90 a month.

Early pension: Age 60 with 30 years of contributions if the insured is involuntarily unemployed and registered as a job seeker for at least 6 months before applying for the pension. The pension is paid at a reduced rate. Early pension: A reduced pension is payable if under age 65. Early pensions are reduced by 8% for each year the pension is taken before age 65 for persons with 30 years of contributions.

Disability pension: The loss of normal earning capacity. If under age 26, the insured must have contributed for 1/2 of the period between age 16 and the onset of disability; if over age 26, the insured must have contributed for 1/4 of the period from age 20 to the onset of disability, with at least 1.800 days of contributions and at least 1/5 of the required contributions in the last 10 years.

Survivor pension: The insured had 500 days of contributions in the last 5 years and died from a common illness, was a pensioner at the time of death, or had at least 15 years of contributions.

Disability pension: For permanent total (all work) disability, the pension is 100% of the benefit base. For permanent total (occupational) disability (100% loss of working capacity in the insured's trade or profession), the award is 55% of the benefit base, plus 20% if aged 55 or older and not employed.

Permanent total disability (all work): The minimum award, if age 65, is €411.76 a month; €484.89 with a dependent spouse.

Permanent total disability (occupational): The minimum award, if age 65, is €411.76 a month; €484.89 with a dependent spouse.

Permanent total disability (third-person assistance): The minimum award is €446,98 a month; €565,74 with a dependent spouse.

If the disability is not caused by a work injury or an occupational disease occurring at age 65 or older and the person does not meet the old-age pension qualifying conditions, the pension benefit is calculated subject to the assessed degree of disability and 50% of the benefit base.

Constant-attendance allowance: 50% of the value of the pension.

Permanent partial disability: A lump-sum award equal to 24 times the monthly benefit base for a temporary disability that may result in a permanent disability.

Survivor pension: 52% of either the survivor's or the insured's benefit base.

For survivors with income below a government-set level, the pension is 50% of income (70% of the benefit base with dependents). The pension is payable to a widow(er).

The minimum survivor pension is €347,30 a month for persons younger than age 65 without dependent children; €435,12 for persons younger than age 65 with dependents aged 65 or older, €466,90.

Orphan's pension: 20% of the insured's benefit base for each orphan under age 18 or disabled.

If not disabled or working but annual income is less than 75% of the minimum wage, the pension is paid up to age 22 with one surviving parent; up to age 24 for a full orphan.

The same rules apply to grandchildren and siblings.

The minimum orphan's pension is €141,18 a month for each orphan. With a maximum 2.232,54 euros.

SS AUDIT AND REGULARIZATIONS

In principle, there are no differences on manager and non manager social security contributions. Such contributions will be all paid under the General Social Security regime.

A special high management relationship exists when the employee is empowered with full independence to execute all acts regarding the management of the company. Under this special regime, the employee will not contribute to the FOGASA or unemployment contribution.

The amount Spanish Social security contributions has suffered an small change on August according to the RDL 5/2006. This figures will change again in January 1, 2007. These modifications will occur once or twice a year.

Employee’s social security contributions amount 6,35% for employees with an indefinite labour contracts and 6,40% with a temporary labour contract.

Employer’s social security contributions amount 23.6% of the employee’s gross salary.

The monthly maximum contribution base amounts 2.897,70 euros. Therefore, the monthly Social Security contribution will not exceed 1.099,39 euros per employee.

No insurance policy of integrative pension fund is mandatory .

The TC1 form additionally includes the FOGASA, formation, unemployment and Accident at work contributions, according to the following details:

- Maximum taxable base: 2.897,70 euros

- Employee SS: 6,35%

- Employer SS: 23,60%

- Unemployment contribution: 5,75%

- FOGASA: 0,20 %

- Educational contribution: 0,60%

- Accidents at work contributions: 0,99 (this percentage varies according with the type of activity).

Social Security surcharges vary depending on the delay of the payment:

• 3% surcharge if social security contributions are made within the first month following to the end of the voluntary payment period.

• 5% surcharge if social security contributions are made within the second month following to the end of the voluntary payment period.

• 10% surcharge if social security contributions are made within the third month following to the end of the voluntary payment period.

• 20% if social security contributions are made afte the third month following to the end of the voluntary payment period..

Withholding on account of PIT are paid on quaterly basis for companies with a turnover of less than 6 million euros, and on a monthly basis for a turnover exceeding this amount. The first tax quarter ends on April 20, the seconds on July 20, the third on October 20 and the fourth on January 20.

5% surchage would apply for a delay between 1 and 3 months,

10% for a delay between 3 and 6 months,

15% for a delay between 6 and 12 months, and

20% for a delay exceeding 12 months.

PIT payments and social security contributions have to be paid in cash or through the companie's Bank Account.

The social security bulletins can be filed through internet and automatically charged the last day of the month.

PIT payments have to be made through the 110 form and handed to the bank.

Any employee should signed up with the Social security within the 6 days before the hiring date. Nevertheless, the Spanish social security does not impose any penalty in those cases on which the employee signes up with the Social Security after the starting date.

It is important to know, if the employee already has or not an Spanish social security number. Nevertheless, if no social security number exists, the social security benefits (unemployment, etc) will be calculated taking into account the period existing from the date on which such number was obtained, and not the date on which the employee signed up with the social security. The employee may obtain himself the social security number.

There is no legal deadline for providing the social security number. Social security will provide this number within 1 day after filing the required documents.

If a labour inspector should detect that the employee has been working since a date prior to the official start of the contract without payment of the related social security contributions, in a company which is not registered within the Social Security, the penalties would be the following:

• Economical penalty for a minimum of € 300,52 with a maximum of € 3.005,06 per employee.

• Additionally, the will oblige to make the corresponding social security payments with a 20% surchage.

The voluntarily regularization for Social Security purposes is not possible.

Only a tax inspector, under a labor inspection, can oblige the company to make such payments with the commented surchage since the effective working date.

Regarding the PIT payments "withholdings on account of PIT", it will equally not be possible to file the tax returns corresponding with a period prior signing up with the Tax Administration.

The labor contract should be registered in the INEM office which is directly connected with the Social Security Administration.

There are no sanctions if the employee does not obtain such number on time.

PRIVACY

Privacy rights clauses should not mandatorily be included in the work contract by a legal point of view.