Financial incentives seek to stimulate open-ended recruitment

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A government Order adopted in Portugal in March 2002 aims to encourage permanent employment by means of financial subsidies for companies that convert a fixed-term contract, on expiry, into an open-ended contract. The new legislation is seen as necessary because fixed-term employment is continuing to increase (currently affecting some 15% of employees), especially among women.

Order No. 255/2002 of 12 March 2002 aims to encourage open-ended ('permanent') employment by means of financial incentives for companies that convert a fixed-term contract, on expiry, into an open-ended contract. The initial effects of the new legislation, which complements certain aspects of earlier legislation on the issue of job-creation, began to be felt in May 2002.

The new measure

In accordance with the spirit of the current national Employment Opportunities Promotion Programme (Programa de Estímulo à Oferta de Emprego, PEOE) (PT0105146N), the intention of the new Order is to encourage an improvement in job quality, by converting the legal labour relationship of the workers concerned from a precarious to a permanent one. The key points of the measure are that:

• employers with fewer than 50 employees which, on expiry of a fixed-term contract, convert it into an open-ended one may apply for financial support in the form of non-refundable subsidies;

• for every fixed-term contract made permanent, a grant of four times the national minimum monthly wage - ie EUR 1392.04 - is awarded. This figure is raised to six times the national minimum monthly wage - ie EUR 2088.06 - in the case of workers with disabilities; and

• this aid is also available for companies with more than 50 employees if the jobs in question are filled by people with disabilities drawing the minimum guaranteed income (Rendimento Mínimo Garantido, RMG) (PT0107159F) or unemployed workers aged 45 years or over, if they have been registered at a job centre for more than 18 months.

The current legislation covering employees on fixed-term contracts has been the subject of constant attention from government bodies and has been regularly discussed, in particular in 1998 when a preliminary draft bill sought to permit an extension of the duration of fixed-term contracts (PT9810106N) and in 2001 when parliament examined a number of proposals for legislation aimed at restricting the growing use of fixed-term contracts (PT0102133N). Legislation which came into force in 2001 (PT0108160F) provided that fixed-term employment contracts are covered by a set of rules governing: the legal framework for terminating an individual fixed-term contract; how fixed-term contracts are concluded and the conditions under which they may be terminated; termination of a contract by mutual agreement; voluntary termination on the part of the employee; and the grounds on which fixed-term contracts may be concluded.

The Order published in March 2002 was preceded by Order No. 196-A/2001 of 10 March 2001, which continued the general endeavour to frame Portuguese employment policy, concentrating certain hitherto dispersed measures in a single statute. The 2001 Order mentioned proposing a system of incentives to stimulate and facilitate access to employment for those who are vulnerable in a way that makes access to the job market more difficult, such as:

• young people in search of first-time employment;

• long-term unemployed people;

• people with disabilities; and

• socially disadvantaged people, such as, in particular, the beneficiaries of the RMG minimum guaranteed income.

To stimulate employment for these groups, the Order proposed a regime based on technical and financial aid exclusively aimed at the creation of jobs for these citizens, in the form of recruitment subsidies and subsidies for the creation of their own employment.

Fixed-term contracts and gender

Order No. 255/2002 takes the continuing rise in the number of fixed-term contracts into account and implements part of the 2001 Order. In 1992, workers on fixed-term contracts represented 11.8% of all employees - a figure which rose to 13.0% in 1996, 12.6% in 1998 and 15.03% in 2001, according to figures from the Department of Labour, Employment and Vocational Training Statistics (Departamento de Estatísticas do Trabalho Emprego e Formação Profissional, DETEFP).

This situation affects women more than men - in 2001, 13.7% of men in employment were on fixed-term contracts and 16.9% of women. As indicated by the table below, the recruitment of men on fixed-term contracts remained fairly stable from the fourth quarter of 1999 to the fourth quarter of 2000, however for women the figure rose by about 50% over the same period. The rise in fixed-term contracts is thus essentially associated with female labour.