Job creation scheme based on hand-over employment contracts

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The "hand-over" employment contract, which has been available in Spain for over a decade for workers aged over 60, has not had much success. However, in late 1997, the Government proposed to amend the scheme to experiment with the part-time extension of working life for workers aged over 65 in order to create part-time employment for young people.

In late 1997, the Ministry of Labour announced that it wished to promote a modification of the "hand-over" employment contract (contrato de relevo). The hand-over contract, which allows workers aged over 60 to take partial retirement with a new part-time employee filling the hours vacated, has been available in Spain for over a decade but has not had much success: in 1996, only 213 jobs were created through this measure. The Government wants to amend the scheme so that those reaching 65 years of age will be able to delay their retirement voluntarily. This proposal is aimed at stimulating the sharing out of part-time work to help incorporate young people into part-time employment.

This proposal is associated with a policy of reducing the cost of the pensions system, an aim contained in the "Toledo Pact" on the reform of the social security system (ES9710220F). Its purpose is to improve the finances of the social security system so that if a worker postpones his or her retirement age, there is at least a partial saving in pension costs.

However, the facts reveal the difficulty of applying this proposal. Suffice it to say that two out of three workers retire before the age of 65. The underlying problem is of a different nature: companies use different systems for dismissing older workers as a way of reducing the workforce to meet the demands of technological innovation, process automation and reorganisation of work. Of this two-thirds who retire before the age of 65, one-third receive incentives to take early retirement as a result of collective bargaining. The remaining third are seriously penalised unless employment benefit covers them until retirement age.

Neither the trade unions nor companies share the Minister for Labour's optimism about promoting part-time employment for young people through the extension of working life. The CC.OO and UGT union confederations have told the Government that this formula provides nothing new and will not provide a means of creating employment. On the contrary, they state that the most serious way to create employment is that already agreed in the 1997 intersectoral agreement for employment security - one of the "April agreements" (ES9706211F).

The leaders of the principal employers' organisation, CEOE, have declared that the Government's new proposal is an interesting measure, but that in fact companies do not want to be obliged to extend the working life of employees, because older workers involve greater labour costs and find it more difficult to adapt to new technologies .