Financial participation and profit-sharing tend to be interpreted as a special and complementary pay mechanism in Spain; it is widespread in companies but limited to a percentage of fixed pay. Employee share ownership occupies little space in collective bargaining and tends to be dealt with through company agreements, often between the companies and the more qualified workers.
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Financial participation and profit-sharing tend to be interpreted as a special and complementary pay mechanism in Spain; it is widespread in companies but limited to a percentage of fixed pay. Employee share ownership occupies little space in collective bargaining and tends to be dealt with through company agreements, often between the companies and the more qualified workers.
Profit sharing and financial participation
Since 1994 the Workers' Statute ('Estatuto de los Trabajadores') has given collective bargaining the power to determine pay. Though it allows for the possibility of company agreements outside collective bargaining, sometimes used by companies and executives, it limits pay supplements linked to goals, productivity or profit-sharing (including schemes not involving share ownership and not proportional to the company profits) to a percentage of fixed pay.
There are three basic types of financial participation by workers.
Profit sharing
In the Spanish case, this is a form of variable pay. It tends to correspond to a percentage of the fixed pay that is either consolidated - and is therefore not variable - or dependent on company profits or productivity, so it may be confused with the productivity bonus. It is hardly ever established as a percentage of profits.
Employee share ownership
This tends to be individual, and is normally observed among managers and technical staff. It is sometimes observed in specific sectors (banking and telecommunications) and is offered in company agreements.
Stock options
These allow employees to purchase company shares at a given price (normally equal to or lower than the market value at the time when they are offered) for a given period of time. There have been experiences of this in the telecommunications and banking sectors, but they have been accompanied by scandals and litigation, often arising from their tax treatment. The following specific systems have been developed.
Plans for giving shares to employees.
Plans for purchasing shares subject to time limits, i.e. stock option plans. These have been controversial because they are similar in nature to pay.
False share plans in which the employees receive a cash sum related to the increase in the share value during the valid period of the plan.
The model of variable pay is common, whereas the collective and open participation of workers in the institutionalised control of share capital is rare in ordinary companies.
The social economy
In Spain, profit-sharing and joint management of companies are a common feature of the social economy in co-operatives and workers' limited companies, in which the workers share the ownership of the capital.
A 'co-operative' ('Law 27/1999' of 16 July on Co-operatives ('Ley 27/1999, de 16 julio, de Cooperativas')) is a company with a variable capital and a democratic structure and management consisting of an association of persons who have common socio-economic interests or needs. To satisfy them they serve the community by carrying out business activities for which the profits are distributed to the partners when the common expenses have been met. The share capital is composed of the obligatory and voluntary contributions of the partners. The partners participate in the economic and social activity of the co-operative, in accordance with the articles of association.
'Workers' limited companies' ('Law 4/1997' of 24 March on Workers' Limited Companies ('Ley 4/1997 de 24 de marzo, de Sociedades Laborales')) are limited companies in which the majority of the share capital is owned by the workers who directly provide services to them and who therefore have a permanent labour relationship with them. They participate in the profits and losses proportionally to their shareholding. The workers are normally registered as self-employed workers and pay their own social security contributions.
There has been a slight increase in the number of partners of co-operatives and a slight decrease in the number of co-operatives. The number of workers' co-operatives tended to fall in the period 2001-2004. As unemployment did not increase, there has been less pressure for the creation of business initiatives of this type, so the rate of formation of co-operatives is now stable.
| Years | Total no. of co-operatives | Workers' co-operatives | ||
| No. of Co-operatives | No. of Partners | No. of Co-operatives | No. of Partners | |
| 2001 | 2,515 | 19,699 | 1,926 | 7,790 |
| 2002 | 2,294 | 27,173 | 1,703 | 6,631 |
| 2003 | 2,126 | 28,450 | 1,500 | 5,727 |
| 2003 (JAN-NOV) | 2,011 | 27,890 | 1,418 | 5,392 |
| 2004(*) (JAN-NOV) | 1,360 | 22,284 | 801 | 3,255 |
Source: Journal of Labour Statistics ('Boletín de Estadísticas Laborales'). Ministry of Labour and Social Affairs (Ministerio de Trabajo y Asuntos Sociales , MTAS).
Workers' limited companies showed a similar tendency, with a peak in the number set up in 2002.
| Years | Total | Agricultural | Non-agricultural | |||
| Total | Industry | Construction | Services | |||
| 2001 | 5,454 | 84 | 5,370 | 838 | 973 | 3,559 |
| 2002 | 6,013 | 85 | 5,928 | 918 | 1,135 | 3,875 |
| 2003 | 5,353 | 69 | 5,284 | 827 | 1,078 | 3,379 |
| 2003 (JAN-NOV) | 5,047 | 66 | 4,981 | 782 | 1,021 | 3,178 |
| 2004(*) (JAN-NOV) | 2,750 | 21 | 2,729 | 409 | 614 | 1,706 |
Source: Journal of Labour Statistics ('Boletín de Estadísticas Laborales'). Ministry of Labour and Social Affairs (Ministerio de Trabajo y Asuntos Sociales , MTAS).
The study shows a striking phenomenon. Though the percentage of workers is similar to that of the economy in general, among the 'capitalist partners' there were a greater number of women (59.81%), which is a very uncommon phenomenon amongst the rest of the entrepreneurs.
The social dialogue and the position of the social partners
The Multi-Sector Agreements for Collective Bargaining ('Acuerdos Interconfederales para la Negociación Colectiva') between 2001 and 2005, particularly those drawn up in 2002 and 2003, establish that collective bargaining is an appropriate instrument for establishing the definition and criteria of a pay structure (fixed and variable) suited to the situation of the sector and company, bearing in mind its direct relation to the new systems of work organisation and the incentives for production, quality or results. The systems applied tend to be goal-sharing and profit-sharing and, almost always outside collective bargaining, employee share ownership.
The definition of the variable items requires the criteria of transparent objectivity in order to establish percentages of variable pay to total pay while ensuring the rights of information and participation in the company of the workers' representatives and the consideration of the specific situations of each sector or company.
There is an increasing tendency to introduce variable pay items related to the results of companies in collective agreements. Of the agreements analysed in 2003 by the Economic and Social Council (Consejo Económico y Social, CES), 35% involved bonuses for productivity. The agreements also included incentives that were directly related to the situation and results of the companies and to the contribution that the workers make to these individually or collectively.
In the opinion of the Spanish Confederation of Employers' Organisations (Confederación Española de Organizaciones Empresariales, CEOE) profit-sharing, and in particular employee share ownership, is an excellent way to involve the workers in the culture of the company, provided that the awarding of rights is accompanied by the acceptance of responsibilities and risks with regard to the company.
These initiatives have had limited application. They have been most effective in establishing bonds of fidelity with workers who are specifically valued, qualified or technical, rather than in obtaining a greater degree of efficiency in production.
According to the CEOE, this line is currently being developed in Spain more than in the past. However, it is observed only in particular sectors and types of company. This is the case of banking, insurance and telecommunications companies of a certain size and more qualified staff with higher incomes.
The General Workers’ Confederation (Unión General de Trabajadores, UGT) aims to develop a trade union strategy for fostering employee share ownership by placing it on the agenda of collective bargaining.
According to the UGT, these formulas are a way of advancing in the construction of the social market economy and, among other factors, increasing the productivity of companies and contributing to their modernisation and democratisation. They are also a means of primary distribution or sharing of income and improving the involvement of workers in their company.
The UGT considers that this system should involve the following requisites:
it must be collective, universal or general, and closely related to systems of participation of workers in decision-making;
it should be placed within a wider framework of social responsibility of companies; and
it should be clearly defined that it complements pay but never replaces it. In general, variable pay according to results must be set as a percentage of fixed pay, according to the trade unions.
Commentary
Models of variable pay have been introduced to meet goals of productivity and other formulas that are known generally as profit sharing.
Despite the considerable influence of the European debate, financial participation open to the whole workforce is very rare in Spanish companies. It tends to be limited to workers with a high income, normally management staff in sectors such as banking, insurance and telecommunications.
Consequently, practices of participation in the management of business corporations, thanks to collective and institutional participation in the share capital of companies, have been insignificant for the vast majority of workers, bearing in mind that the social economy is also of little importance. (Daniel Albarracín, Fundación CIREM).
Eurofound recommends citing this publication in the following way.
Eurofound (2005), Variable pay and profit-sharing: The Spanish case, article.
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