New measures to reduce temporary employment

As part of a new legislative proposal, the Spanish government, employer organisations and trade unions signed a preliminary agreement in April 2006. The proposed new legislation aims to curb the widespread use of temporary contracts in the Spanish labour market. It also contains provisions enabling entrepreneurs to reduce their direct taxes on labour and transform some temporary contracts into permanent ones.

In April 2006, the Spanish government signed a preliminary agreement with employer organisations and the two trade union confederations, the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO) and the General Workers’ Confederation (Unión General de Trabajadores, UGT). This agreement is part of a legislative proposal, which was due to be presented in April 2006, and aims to reform the current labour legislation. The reforms include a series of measures designed to foster entrepreneurship, notably:

• cutting down on redundancy payments, mainly for temporary contracts for which companies will have to pay an equivalent of 33 working days per year, thus bringing legislation into line with measures regulating redundancy payments for women, young workers and those over 45 years of age;

• reducing corporate taxes to encourage employment under long-term contracts.

Reduced taxes on labour

In the proposed reforms, the government plans to reduce labour costs by cutting direct taxes on labour through two measures:

• lowering the employer’s contribution to unemployment benefits, which currently stands at 6% of the worker’s basic salary; this measure is to be put in place between now and 2008;

• halving the employer’s contribution to the Wages Guarantee Fund (Fondo de Garantía Salarial), which ensures payment of a minimum level of socially acceptable wages and compensation to workers made redundant by enterprises in a state of crisis or considered to be insolvent.

In an attempt to encourage more long-term contracts, the government also intends to devise further incentives for employers to recruit special needs workers on a long-term basis.

Fewer temporary contracts

The Spanish Ministry of Labour has also proposed reforms that will allow temporary employment contracts to be transformed into permanent ones, thereby reducing the high number of temporary contracts. This would apply to workers who have two or more years’ experience in the same company and to workers originally recruited by temporary work agencies.

In order to reach this preliminary trilateral agreement, the two trade union confederations have put aside their aim to negotiate the regulation of subcontracts. However, the employer organisations have continued to push for measures that allow for a reduced number of explanations for [dismissals](/search/node/areas OR industrialrelations OR dictionary OR definitions OR dismissals?oldIndex). In addition to the agreement, the government and social partners will participate in working groups that will focus on temporary staff agencies and labour inspection.

Reactions by the social partners

The government and the social partners have expressed their concerns about the increase in temporary employment in Spain. Currently, the rate of temporary employment in Spain is the highest in the European Union. In this context, all the social partners feel that employment stability and job creation must be fostered. However, some of the social partners disagree with the measures proposed to reduce unemployment and temporary employment levels. Several trade unions oppose these latest reforms, arguing that they are mainly aimed at making the Spanish labour market more flexible. According to these unions, this is reflected by the fact that the measures make it easier for employers to lay off workers. They claim that all workers will soon be affected by this ‘undefined’ contract, which only provides for 33 days of compensation per year of service for individual unfair dismissal, with up to a maximum of 24 months’ pay; the current legally established compensation is substantially higher at 45 days’ pay per year of service, with a maximum of 42 months’ pay (ES0311108T).

On 1 April 2006, a number of trade unions organised a demonstration in Madrid, involving 5,000 people who protested against the new labour reform proposal. Further actions were already planned in various Spanish cities forApril, and on International Workers’ Day on 1 May, to denounce what some unions consider to be a legal manoeuvre that seeks to undermine workers’ rights, while increasing flexibility and insecurity in the labour market.

Mari Luz Castellanos, CIREM Foundation