After a year of negotiations, the social partners have reached agreement on a reform of the Spanish labour market. The agreement will be approved in the form of new legislation which will come into force in July 2006. However, some provisions of the agreement, such as reducing the costs relating to dismissals, have been rejected by two trade union confederations which were not party to the negotiations.
On 9 May 2006, the government, the Spanish Confederation of Employers’ Organisations (Confederación Española de Organizaciones Empresariales, CEOE) and the main trade unions, including the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO) as well as the General Union of Workers (Unión General de Trabajadores, UGT), reached agreement on the text of a new labour market reform that they had been negotiating for the past year.
The reform is to be approved through a bill, which – according to the government – will facilitate its introduction and reduce any uncertainties about its content and application. This way of drafting a bill has been previously criticised whenever it has been used, despite the fact that the same method has been used for the approval of all labour reforms since 1997; presumably, this case will be no exception. The new legislation was due to come into force in July 2006.
Objectives of the reform
The labour market reform does not deal with either the high rate of employee turnover or the national minimum wage. The former will be dealt with through collective bargaining and the latter will be the exclusive responsibility of the government. The main objectives of the reform are as follows:
- to limit the repeated renewal of employment contracts within the same company by obliging companies to offer a permanent contract to any worker who has had two or more fixed-term contracts and has worked in the same job for over two years within a period of 30 months;
- to offer incentives to companies to provide permanent employment contracts and establish fixed quotas (instead of the current percentage of contributions) for the target groups for these incentives, namely women, young workers, disabled workers and persons on job training contracts;
- to reduce the unemployment contributions paid by employers;
- to extend unemployment benefit to persons aged over 45 years without family responsibilities;
- to include temporary workers among the beneficiaries of the Wages Guarantee Fund (FOGASA) (Fondo de Garantía Salarial);
- to provide a fixed yearly subsidy (with a maximum duration of three years) for temporary contracts that are converted into permanent contracts before 31 December 2006, and to allow temporary contracts prior to 2008 to be converted into permanent ones.
Controversial points of reform
The last point on subsidising the conversion of temporary contracts into permanent ones has been criticised by sections of CC.OO and by the National Confederation of Labour (Confederación Nacional del Trabajo, CNT) and the General Confederation of Labour (Confederación General del Trabajo, CGT). The union confederations claim that this reform offers major advantages to employers (ES0604049I) that outweigh various other measures introduced, such as the unemployment benefit for persons aged over 45 years without family responsibilities and the expanded compensation of the FOGASA.
The union confederations continue to cite further measures that have been introduced but that will not counterbalance the benefit for employers of the aforementioned contract conversion subsidy. These actions include the removal of the ‘integration contract’, new measures on the transfer of workers and an increase in the number of labour inspectors.
In addition, they feel that, by reducing dismissal costs, the reform provides a legal support for precarious employment relations and puts an end to the stable and permanent contract. However, contracts to foster stable employment relations will become a general requirement for newly recruited workers.
The limit placed on the repeated renewal of contracts risks being ineffective, as it is not backdated and can easily be avoided by employers. Moreover, dismissals will not only be cheaper for employers, but will also be easier to put into practice. This means that a case for individual dismissal will be created by the employer on the grounds of objective economic, organisational or productive motives. The discussion of these cases in the labour courts will shortly be abolished through a modification of the Labour Procedure Law that will complete and extend the scope of previous measures, such as several aspects of the 1994 labour reform.
Mari Luz Castellanos, CIREM Foundation