New proposal for unemployment benefit reform

At the end of March 2006, the Portuguese government presented a new proposal for unemployment benefit reform. The first proposal, presented in October 2005, generated much controversy among the social partners. Although pleased that the new proposal is more favourable, the social partners remain dissatisfied with some aspects of it. One of their main objections is to the suggestion that a worker could receive unemployment benefit along with dismissal compensation when a labour contract ends by mutual agreement.

On 31 March 2006, following six months of bilateral negotiations, the Portuguese government presented to the Standing Committee for Social Concertation (Comissão Permanente de Concertação Social, CPCS) a new version of the unemployment benefit reform, which could be considered as a final attempt to promote consensus on the issue. The first proposal of the reform, presented in October 2005, generated much controversy among social partners.

Main issues

A sensitive aspect of the first proposal was the obligation on unemployed people to stay at home for two hours each day, a requirement designed to curb fraudulant behaviour, such as working and simultaneously receiving unemployment benefit, and to facilitate monitoring of unemployed people. In the revised version, the government withdrew this constraint. However, as a condition for receiving unemployment benefit, the new version requires unemployed people to visit their local employment centres every fortnight and to prove that they have been actively seeking work.

The government also reviewed the duration of unemployment benefit. In the first version of the reform, the government proposed to reduce the duration from one year to six months for unemployed people who were less than 30 years old and had paid less than two years of social security contributions. For unemployed people aged between 45 and 50 years, the duration was increased by two months for each period of five years of social security contributions. In the current proposal, the government links the duration of unemployment benefit closely to the relative period of social security contributions, thus introducing the concept of ‘contribution density’ (densidade contributiva). The idea is to increase the duration of unemployment benefit by about one month for those who have a minimum of 270 days of annual contributions, over a period of five years. The General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) disagrees with this approach, arguing that it will not have a significant impact for the majority of unemployed people, mostly because they have temporary or short-term contracts with long periods of unemployment in between.

Another issue presented for discussion was the notion of a ‘convenient job’ (emprego conveniente). The latter relates to a job offer which unemployed persons have to accept, if they do not wish to risk losing unemployment benefit. In the first version of the reform, a convenient job was defined as a position that would be compatible with the worker’s capacities and skills. Such a job offer would also take certain criteria of geographical mobility of workers into account: unemployed people were obliged to accept a job when displacement expenses did not exceed 20% of the monthly net wage or when commuting time did not exceed 25% of their working time. This was a very sensitive issue for the unions. In the new version of the reform, the displacement expenses shall not exceed 10% of the monthly net wage.

However, the most controversial issue, still present in the new proposal, is related to the possibility for unemployed people to receive unemployment benefit alongside dismissal compensation in cases where the labour contract ends by mutual agreement. The government’s proposal outlines several limitations to this practice, including the stipulation that this should only be an option in cases where a company is facing financial difficulties, and for a certain proportion of employees, to be determined in relation to the company’s employment level.

Views of the social partners

The social partners have different viewpoints on this issue. The General Workers’ Union (União Geral dos Trabalhadores, UGT) and the Portuguese Confederation of Tourism (Confederação do Turismo Português, CTP) share the view, which is close to the government proposal, that the cumulative scheme should be allowed within certain limits. However, the Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP) and CGTP oppose the government’s proposal. CIP disagrees with introducing any limits and argues that they could undermine the possibility of company restructuring. On the contrary, CGTP contests the government proposal, arguing that companies very often use the end of contract by mutual agreement idea as a cover for non-voluntary dismissal. According to CGTP, the possibility of accumulating dismissal compensation and unemployment benefit paves the way for collective [dismissals](/search/node/areas OR industrialrelations OR dictionary OR definitions OR dismissals?oldIndex), at the expense of the social security system. For this reason, CGTP is in favour of non-cumulative dismissal compensation in cases where labour contracts end by mutual agreement, and rejects the idea that unemployed people who have already received dismissal compensation may also receive unemployment benefit.

Maria da Paz Campos Lima and Reinhard Naumann, Dinâmia