Relay part-time scheme to be implemented

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Legislation expected to be adopted in Italy in May 1999 would put into effect a so-called "relay part-time" scheme, which has been the subject of growing debate in recent months. This system involves workers approaching retirement switching to part-time work, with young people recruited part-time to work the hours thus vacated. In the light of plans to revise employment-creation incentives, the main problems facing implementation of the part-time relay system seem to be financial.

In recent months, the Minister of Labour, Antonio Bassolino, has repeatedly and forcefully argued for the use of part-time arrangements as a systematic instrument for easing the transition between workers approaching retirement and newly-hired young people. According to Mr Bassolino, the combining of two part-time contracts in such a "relay" scheme would on the one hand provide important access to employment for young job-seekers, and on the other, provide a significant alternative to early retirement schemes for older workers. Early retirement involves both high social security costs for the state, which are no longer bearable, and "wastage" of skilled and capable human resources. Moreover, one of the government's priority aims is definitively to eliminate early retirement, including those made possible by so-called "long-term mobility" scheme (IT9802319F).

Relay part-time contracts

The Minister's proposal is not a novelty, but rather a development of a provision already contained in law 196 of 1997 (the so-called "Treu package," which set out the rules for implementation of the September 1996 tripartite "pact for employment" - IT9702201F). In effect, article 13 of the Treu package introduced a set of provisions to grant incentives for reduced working hours, by means of relief on social security contributions. The total amount of resources available for financing reduced working time schedules is around ITL 1,000 billion. Among other measures, the article provides for reductions in social security contributions for firms which transform their employment relationships with workers qualifying for retirement within the next three years into part-time contracts. These incentives are to be granted only if the firm simultaneously hires a young job-seeker aged under 32 with working hours at least equivalent to the reduction in working time which applies to the employee close to retirement. However, these measures to encourage working hours reductions have yet to be implemented - owing to factors such as the continuing discussion surrounding the draft bill to introduce the 35-hour working week (IT9803159N).

While introduction of the "relay" system by an inter-ministerial decree to enact law 196/97 has not yet come about, it is now being suggested that the government should be delegated the power to issue rules on "turnover through part-time work". In this way, the "relay" scheme would no longer be one of the numerous measures to encourage reductions in working hours, but would instead become a specific active employment policy.

Therefore, the parliamentary bill partly implementing the tripartite "social pact for development and employment" of 22 December 1998 (IT9901335F) includes an amendment which empowers the government - as part of an overall reform of job-creation incentives and of "social shock-absorbers" (which ease the blow of redundancies - IT9802319F) - to define measures to reinforce those contained in article 13 of law 196/97 and which "facilitate the use of part-time contracts by older workers in order to foster employment creation for young people" (art. 43(1)(g)). The draft bill was passed on 11 March 1999 by the Senate and was examined by the Chamber of Deputies' labour and budget committees at the beginning of April. Its definitive approval was expected for the first half of May.

The positions of the social partners

Trade unions and employers' organisations have welcomed Mr Bassolino's proposal and the possibility of introducing a specific regulation on the utilisation of part-time work as a means of "job alternation". The Confindustria employers' confederation has praised the initiative, but has asked for clarification of the costs and mechanisms of financing the scheme. Moreover, according to Confindustria, the "relay" scheme could be an important part of welfare reform as it affects the social security system.

It is precisely the social security aspects of the "relay" system that the trade unions want to see clarified. The three main confederations, Cgil, Cisl and Uil, are concerned that a "soft" exit from employment by means of part-time arrangements may affect employees' pensions (which are calculated on the basis of wages over the last 10 years of work). In order to avoid any possible reduction in pensions, the unions have asked for the social security payments in respect of the working hours no longer worked by older workers under the "relay" system to be met by the state. The resources necessary for this financing could be drawn from the working hours reductions fund of ITL 1,000 billion created by law 196/97. However, the unions have expressed further concerns on this point, given that there are numerous measures and incentives to be financed by this fund, and the government, they maintain, has still not taken up a clear-cut position on the matter. One aspect of the proposal that has received an especially positive reaction from the unions is the intention to define part-time work as a substantive alternative to early retirement. In fact, the unions believe that in some cases the latter is used improperly to resolve problems of labour turnover and to "rejuvenate" the workforce. Sergio Cofferati, the confederal secretary of Cgil, has emphasised the usefulness of part-time work in managing exit from and entry to employment, in that it encourages the transfer of an important stock of skills and knowledge from the worker approaching retirement to the newly-hired worker.

Commentary

The interest shown by the social partners in the systematic use of part-time arrangements to facilitate exit from and entry to employment seems significant. However, the actual effectiveness of the scheme will, crucially, depend on how it is regulated. From this point of view, the doubts and perplexities expressed by the trade unions and employers seem justified.

First, the use of part-time "relay" arrangements should be made economically attractive to workers approaching retirement. That is to say, the older workers involved in these schemes should be guaranteed incomes comparable to those that they can earn from full-time work, and the level of their pensions should not be affected. For this reason, mixed forms of work income and pensions might be introduced, like those already present in Germany and France, ensuring that the period worked on a part-time basis counts fully towards pension entitlement.

Second, close attention should be paid to defining the age and the timing of access to "exit" part-time arrangements, so that the state's social security costs are counterbalanced as much as possible by the contributions paid in respect of dual part-time arrangements, and by the possible savings arising from partial payment of pensions. For this latter reason, it might be useful if part-time work came to represent an attractive alternative to retirement itself for a limited period of time.

Third, the structure of the "relay" system should also represent a significant opportunity for young people entering employment for the first time. One possibility might be to establish progressive increments in working hours and wages, accompanied by significant amounts of training.

In conclusion, one may say that the task of defining a systematic set of rules to regulate the "relay" system does not seem straightforward. The encouraging aspect is that the power delegated to the government would be part of a general reform of employment-creation incentives, with the possibility of defining an overall and systematic framework, while restricting the risks attendant on sporadic measures. On the other hand, it seems unlikely that the introduction of the part-time "relay" system on its own will significantly increase the use of part-time contracts (which in Italy amount to only 6%-7% of the total) to a level where important effects are exerted on employment, as has happened in other countries, the Netherlands in particular. Instead, the definition of specific measures in support of part-time employment tout court- as are already partly provided for by law 196/97 - would be necessary for this purpose (Roberto Pedersini, Fondazione Regionale Pietro Seveso).

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