New rules on unemployment benefits

As of 1 July 1999, a new unemployment protection regime came into effect in Portugal, making some significant new changes - notably by easing the move from unemployment to retirement benefits. Trade unions believes that the new legislation brings some positive innovations.

Decree-Law 119/99 of 14 April 1999, which came into effect on 1 July, outlines a new legal framework for unemployment benefits under the general social security regime. It applies to all non self-employed workers.

In its preamble, the decree-law specifically highlights two essential problem areas in unemployment protection. The first is that the battle against unemployment is basically handled by means of whatever macroeconomic policy is adopted by the government at a given time. The other is that there is a serious need for social security to intervene in the case of unemployed people who, due to their age, or level or type of skills, find it more difficult to find new employment.

New provisions

In the new law, revisions and improvements in the regime of social protection for unemployed people focus primarily on: increasing the length of time during which the person may receive unemployment benefits; improving the legal regime covering collective redundancies when companies modernise their facilities; and coordinating unemployment benefits with old age pensions by making the age at which a person can apply for old age benefits more flexible.

On the last point, the age of the recipient is taken into consideration when determining the duration of unemployment benefits, in many cases resulting in a longer benefit period for older workers. Under the new regime, in cases of long-term unemployment where unemployment compensation and social unemployment benefits are exhausted, the age at which retirement benefits may be claimed is lowered to 60 or 55 years, depending on the specific situation (the normal retirement age is 65.) In addition, the decree-law is especially innovative in making retirement benefits available to workers 50 years or older who have made contributions to the social security system for at least 20 years (although in these cases the amount of the pension is reduced).

Thee new regulations also provide for the establishment of a technical committee whose role is to allow situations where a worker becomes unemployed involuntarily to be defined better. To achieve this, the technical grounds for termination of contracts when companies lay off permanent full-time employees because of restructuring will be analysed. Unemployment compensation awards resulting from termination of contracts by mutual consent will also be monitored.

At another level, the new law clearly establishes a dichotomy between passive and active measures in its treatment of forms of compensation for loss of employment. Unemployment compensation and social unemployment benefits fall into the passive category. Under the new rules, the active category includes: one-off payments of the total amount of unemployment benefits to which the person is entitled, with the idea of making it possible for that person to become self-employed; the possibility of accruing partial unemployment benefits through part-time work; total or partial suspension of unemployment contributions while a person is receiving pay to attend vocational training courses; and continuation of payment of unemployment benefits while involved in occupational activity.

Trade union reactions

According to the trade unions, the new legislation contains some positive innovations.

In the view of the General Workers' Union (União Geral de Trabalhadores, UGT), the creation of partial unemployment benefits for part-time workers encourages reintegration into the labour market (even in cases where the pay offered in the new job is lower than unemployment benefit). It also contributes toward improving conditions for part-time workers, namely by allowing for partial unemployment benefits in cases where a benefit recipient enters into a part-time employment contract (under certain conditions).

UGT also views in a positive light the extension of the period during which contributions to social security for unemployment are suspended if a person becomes self-employed, as well as the new rules covering suspension of of contributions when a person enters a new job or training programme (in which the recipient continues to receive at least partial unemployment benefits), and the special protection provided for unemployed persons over the age of 45.

The union confederation does, however, point out some aspects that it believes need to be dealt with more adequately. It cites: the lack of provision for involvement of the social partners in the committees to be created to monitor cases of involuntary unemployment through agreements to terminate contracts in companies which are laying off employees due to restructuring; the fact that the results of applying the former unemployment regime have never been evaluated; the lack of measures to reduce the combined social security levy on companies in order to encourage them to hire long-term unemployed people; the lack of an adequate characterisation of redundancy situations where termination of the employment contract by mutual consent implies involuntary unemployment; and the fact that certain categories of workers are still not covered by unemployment protection (such as domestic service workers, workers employed by the state, workers with both regular employment and self-employment income above the national minimum wage, and those who work in two part-time jobs).

The position of the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) on the new unemployment benefit regime was not available at the time of writing.

Commentary

Three aspects of the new regime are noteworthy. First, it appear that the changes, particularly at the level of the overall system, significantly improve the way that unemployment benefit is handled legally. Second, the new law provides greater flexibility in dealing with unemployment situations, allowing the system to respond better to the wide range of situations that come up in reality, especially as regards "active measures." Lastly, it provides for a better definition of situations of involuntary unemployment, not only in the case of termination of contracts by mutual consent, as referred to above, but also as it applies to termination of contract by the worker citing justifiable grounds. Under the new rules, these cases can be considered involuntary unemployment if the grounds claimed by the worker are not challenged by the employer or, if they are refuted, when the worker is able to prove that a lawsuit has been brought against the employer. (António Nunes de Carvalho; Maria Luisa Cristovam, UAL)