Decree promotes conversion of temporary into permanent work contracts

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Royal Decree-Law 5/1999, which provides incentives for the conversion of temporary employment contracts into permanent ones, came into force in Spain in early April 1999. This decree reaffirms the continuity of the measures designed to promote secure employment introduced since 1997.

On 9 April 1999, the Spanish government approved Royal Decree-Law 5/1999 on employment measures, using an emergency procedure. This decree amends certain aspects of Law 50/1998 of 30 December 1998 that accompanied the state Budget. The emergency procedure, which caused surprise amongst the opposition, the social partners and public opinion, was used because the new law is aimed at correcting the shortcomings and technical errors in Law 50/1998.

The measures promoting employment contained in Law 50/1998 had been the subject of lengthy negotiations between the government, employers' associations and trade unions. Although no agreement had been reached, it had become clear during the course of the dialogue process that this law would give continuity to the incentives to promote permanent recruitment decreed by the government after the intersectoral agreements of April 1997(ES9706211F). However, the final text of the law introduced a substantial modification: the incentives for converting temporary contracts into permanent ones were no longer general, but covered only certain groups (the under-30s, over-45s and long-term unemployed people).

The government took four months to correct this error. The new Royal Decree-law 5/1999 provides general incentives to employers for converting temporary contracts into permanent ones, with an allowance of 25% of the employers' general social security contributions during the two years following the conversion. A special incentive is also established for workers over 45 years of age, for whom the allowance of 25% covers the entire duration of the transformed contract. Although the decree came into effect on 11 April, both measures are backdated to 1 January 1999. The decree also corrects a great number of imprecise points or technical errors contained in Law 50/1998, which had led to many legal uncertainties in the application of the regulations.

The social partners have expressed their satisfaction at the decree, which reaffirms the continuity of the measures designed to promote secure employment introduced since 1997. However, they have criticised the government for technical negligence in drawing up Law 50/1998 in the first place and its delay in amending the errors, which have reportedly had very negative effects on the recruitment policies of companies.