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A series of intersectoral agreements on employment promotion signed by the Spanish social partners in April 1997 are due to expire in May 2001. The social partners started negotiations over a new version of these agreements in summer 2000 but, in view of their failure to reach a consensus, in March 2001 the government decreed a series of labour market reform measures. These have been strongly criticised by the trade unions.
In May 2001, the 1997 intersectoral agreements on employment stability, collective bargaining and "filling the gaps in regulation" (the "April agreements"), Spain's main labour market reform of the past 10 years (ES9706211F), complete their four-year term of of validity. Therefore, in summer 2000 the social partners began to negotiate another possible agreement on labour market reform (ES0006194F and ES0011219N).
Though unemployment is still very high (the current rate is 13.6%), the trade unions feel that the Spanish labour market's most important problem is the high rate of temporary employment – almost 32% when the EU average is 13%. This rate has fallen since 1997 (when it was 34%), but only slightly (ES9907238F). The trade unions propose several measures for dealing with this situation of precarious employment. The first is to make temporary contracts less attractive for employers by increasing their social security contributions in respect of employees on the least stable temporary contracts, contracts for certain works or services and contracts for casual work, and to decrease them for open-ended contracts. The second is to reduce temporary recruitment drastically, except for cases in which there are objective reasons for it, ie when the activity involved is clearly temporary. The unions have therefore called for temporary workers who have been employed for 20 months – a clear demonstration that the work is continuous – to be given open-ended contracts. The third proposal is to offer some compensation for dismissal to temporary workers, who currently receive nothing even if they have worked for several years (ES0012226F). The unions also want subcontracting to be regulated, because they consider that it is contributing to the deterioration of employment.
The employers' organisations are also concerned about unemployment and the high rate of temporary employment, but are confident that these problems will be solved by the market. They therefore wish to reduce the cost of unfair dismissal payments to from 45 to 33 days per year of seniority for all workers recruited on new open-ended contracts (the employers' first proposal was 25 days), and to eliminate "procedural wages" (salarios de tramitación) - ie those that the company must pay while the dismissal goes through the courts or the administrative procedures. The employers' organisations argue that if dismissal were less expensive, more workers would be given open-ended contracts. They also propose greater flexibility for the new type of part-time contracts agreed by the government and trade unions in 1998 (ES9811289F), which have not proven popular among employers. They suggest that any workers who perform fewer hours than those in full-time employment should be considered as part-time workers, and that their working hours should be flexible on a yearly basis.
The positions of the social partners were therefore quite distant, which is why the negotiations went on for so long. The trade unions rejected any general reduction in the cost of dismissal, although they agreed that the lower payments could continue to be applied to the cases established in the 1997 April agreements - ie workers under the age of 29 and over the age of 45, with a few other special cases. However, they called for the revision of the current incentives to employers for concluding the employment promotion contracts introduced by the 1997 agreements. In the area of part-time jobs, they were in favour of stable working hours and timetables and a clear difference in the number of hours between part-time and full-time jobs.
The disagreement was mainly over the generalised reduction in the cost of dismissal and the subject of temporary employment. The employers' organisations refused to accept limits to temporary recruitment or an increase in the cost of temporary contracts. The only point on which the employers agreed was to give 12 days' pay per year as compensation for dismissed temporary workers.
On 2 March 2001, with the April 1997 accords due to expire on 17 May and no sign of agreement between the social partners, the government introduced a decree to reform the labour market, probably because it wished to take the initiative on this matter in the current favourable economic situation. Several international bodies had also requested greater flexibility in the labour market.
The most important aspect of the decree is that the prevailing programme of employment promotion, through special open-ended employment contracts which attract several types of reduction in employers' social security contributions, has been continued and extended to many new cases. These include: unemployed women aged 16 to 45; unemployed women in sectors where they are poorly represented; people who have been unemployed for at least six months; unemployed people over the age of 45; and unemployed women who have had children, if they are hired in the 24 months following childbirth. These contracts are also now applicable to special cases, such as people earning integration incomes and young people from institutions for the protection of minors. The reduction in employers' contributions ranges from 20% to 100% (the highest rate being applied to women recruited after childbirth). The decree also introduces limited compensation for the dismissal of workers on temporary contracts, amounting to eight days' pay per year worked.
There are two main changes relating to part-time employment. First, part-time work has been redefined as "employment in which the number of hours is less than that of comparable full-time workers (ie in the same company or covered by the same collective agreement)". Second, the decree allows working hours additional to the agreed part-time hours to be distributed over the year, with seven days' notice given to the worker.
Finally, in cases of subcontracting, the decree provides that the workers of the subcontracting firm must be told who the main employer is. The main employer will be jointly responsible for the wage and social security obligations of the subcontracting companies, and is obliged to check that the subcontractor is up to date with social security payments before initiating the relationship.
Some of the media and many experts claim that the new decree simply favours employers. As for the trade unions, they oppose the decree, decry the absence of social dialogue and have threatened to be more aggressive in collective bargaining and to create tension in industrial relations in response to the perceived breakdown of the social dialogue. The prospects for the current debate on pensions (ES0006194F) are therefore poor. The decision has been criticised not only by the political opposition, but also by some of the regional parties that usually support the government. The European Commission is initially favourable to the reform, but will wait to see how it develops.
The first comment that should be made on this reform is that the main problem of the Spanish labour market, temporary employment, has not been approached seriously. If in previous years, with almost identical incentives, the number of permanent contracts concluded was never greater than 9%-10% of the total, it seems unlikely that the situation will change greatly. In other words, for many companies it is still profitable to use temporary recruitment. The market alone cannot solve this problem, and socio-political measures are necessary. The amount of compensation offered by the new reform at the end of temporary contracts – practically the only measure that has been introduced to assist employees – is very small. Considering that the average temporary contract is for less than six months, the compensation of four days' pay would amount to between ESP 8,000 and ESP 10,000, which is far less than the company saves through social security contribution reductions. This could therefore lead to "permanent" contracts of six months' duration, so there would now be two types of temporary contracts: real ones and "short-term permanent" ones. In the area of part-time employment, the employers have gained greater flexibility. Only subcontracting is subjected to a certain degree of regulation by the new decree.
The employers wanted the cost of unfair dismissal (ie of dismissing workers when the company wishes) to be far lower than at present. They have obtained this for a large proportion of new open-ended contracts, and they have also obtained reductions in their contributions. The current cost of dismissal is only high for companies with large workforces with long service that wish to hire younger, better-trained workers on lower wages (ES0012226F). For new open-ended contracts, however, the amount of compensation is very low, particularly because it is now easier for companies to claim "objective reasons" for dismissal. The opposition of the trade unions to reducing the cost of dismissal is understandable if one considers the high unemployment, insufficient unemployment cover and low unemployment benefit in Spain (ES9810183F). Nevertheless, the reduction in the cost of dismissal could have been a lesser evil if serious steps had been taken to reduce temporary employment. The government has therefore missed an opportunity to introduce a more coherent reform, and has seriously damaged the social dialogue. (Fausto Miguélez, QUIT-UAB).