Spain labor market: Wage growth projections and severance reform

Spanish companies are planning wage increases for 2027, with some sectors expected to exceed 3%. According to a salary planning study by WTW, organizations are moving toward selective and sustainable adjustments to maintain competitiveness without significantly increasing structural costs. Rather than broad increases, companies are focusing on specific groups, capabilities, and positions that have the highest impact on the business.

Simultaneously, the Spanish government is preparing a deep reform of severance pay. Labor Minister Yolanda Díaz has criticized current dismissal costs, stating that the average cost of approximately 8,000 euros is “extremely cheap.” Díaz argued that the current system fails to account for the individual circumstances of workers, a point reinforced by a condemnation from the European Committee of Social Rights. The proposed reform aims to individualize compensation to better cover the actual damage caused by unfair dismissals, moving away from the fixed-rate models established in previous years.