UGT proposes compensation on termination of temporary contracts

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In summer 1999, Spain's UGT trade union confederation proposed compensating workers on the termination of temporary contracts, in order to curb excessive use of these contracts by employers. Whilst there has been a recent increase in the absolute number of permanent employment contracts signed, by April 1999 they still represented only 9.6% of the total number of new contracts.

The UGT trade union confederation has proposed compensation for workers for the termination of temporary contracts. This is intended to discourage excessive use of temporary recruitment by employers. According to UGT's general secretary, Cándido Méndez, this proposal would grant a level of compensation for dismissal inversely proportional to the duration of the contract: the shorter the contract, the greater the compensation. One idea is to use the existing level of compensation for unjustified dismissal to set the maximum level for a temporary one-month contract. In this case, compensation would amount to 3.7 days' wages. This proportion would decrease progressively as the length of the contract increased.

This proposal has been made in the context of a moderately critical assessment of the impact of the measures to promote secure employment that have been developed since the signing of the intersectoral agreement on employment security in April 1997 (ES9706211F). On that occasion, the trade unions and employers' organisations agreed for the first time on criticising the abuse of temporary recruitment. This marked the beginning of the policy of encouraging permanent recruitment through economic incentives and the creation of a new type of permanent contract with a lower cost of dismissal.

Two years later, it seems clear that this policy has led to a turning point in recruitment strategies, with a considerable and sustained increase in the number of permanent contracts. 204,200 permanent contracts were signed in 1996; after the agreement this figure has risen to 707,500 in 1997, 971,000 in 1998 and 404,500 between January and April 1999. Over this period the proportion of permanent contracts has risen from 4.1% to 9.6% of the total. Nevertheless, this is still too moderate a development to have had a clear impact on Spain's rate of temporary employment, which has fallen only from 33.8% in 1996 to 33.0% in 1998: a third of all wage-earners are still on temporary contracts.

In the bargaining process over the 1997 intersectoral agreement the trade unions had already stated that incentives for permanent recruitment must be accompanied by economic penalties on temporary recruitment, but this question was finally laid aside. In the 1999 state Budget, the government agreed to increase employers' social security contributions for temporary contracts, although the rise was far smaller than that demanded by the trade unions. With its new proposal, UGT aims to bring this question up again, using a formula that penalises employers whilst increasing the income of workers who are subject to insecurity and "labour rotation".

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