Unions split over tough labour agreement

The Portuguese government and only one of the country’s two main union confederations, the General Workers’ Union (UGT), signed a new labour agreement on 18 January. Ministers had set up the bilateral talks on growth, competitiveness and employment after a general strike. Although the government withdrew proposals to increase working time, the General Confederation of Portuguese Workers ( CGTP) refused to sign because other rights of workers have been severely curtailed.

Background

Social concertation in Portugal has been weak since the centre-right wing coalition government of the Social Democratic Party (PSD) and the People’s Party (CDS-PP) came into power in June 2011. The government has used its majority in parliament to push through its decision to go beyond the agenda set by the Memorandum of Understanding with the Troika in May 2011 (PT1003039I) and has not involved the social partners represented in the Standing Commission for Social Concertation (CPCS).

The government did present a draft proposal to the CPCS, on 29 September 2011, for a ‘Compromise on growth, competitiveness, and employment’. However, other aspects of government policy on labour had not been submitted to the CPCS for discussion and possible compromise. Indeed the government’s first bill, in July 2011, was to tax the Christmas allowance, affecting all employees (PT1107029I). This was followed by a package of measures, again not discussed with the social partners, to freeze pensions, reduce social benefits, and abolish annual allowances. They formed part of the State Budget for 2012, presented to parliament in October 2011 (PT1110019I). The package also included the announcement of an increase in daily working time in the private sector by half an hour, without compensation.

Portugal’s largest trade union confederations, the General Confederation of Portuguese Workers ( CGTP) and the General Workers’ Union (UGT), jointly called a general strike in protest, held on 24 November 2011, the day before parliament was to vote on the 2012 budget. A few days after this, on 28 November, the government held a meeting at the CPCS to discuss the increase in working time, and agreed to further discussions with the social partners. However, a week later on 7 December, the Portuguese Council of Ministers ignored this commitment and approved a draft bill on working time, presented to parliament on 16 December 2011, and which was expected to be passed in the second half of January 2012 (PT1201029I). Discontent escalated at the government’s unilateral decision.

On 22 December 2011, the government held another meeting at the CPCS discuss its ‘Compromise on growth, competitiveness and employment’ with the social partners, but the atmosphere was so bad that the General Secretary of the CGTP, Manuel Carvalho da Silva, abandoned the meeting describing the government proposals as ‘social terrorism’. The new version of the ‘Compromise’ included proposals to:

  • abolish the right of workers with good attendance to get an extra three days annual leave on top of the statutory 22 days;
  • abolish two civilian and two religious public holidays.

The General Secretary of the UGT, João Proença, said he would not sign any agreement which increased daily working time by half an hour. The talks therefore ended in failure.

New talks lead to agreement which penalises workers

The government then held bilateral meetings with the social partners to create the conditions needed to reach agreement. After an initial postponement, CPCS held a plenary session on 16 January 2012, where the final version of the Compromise on growth, competitiveness and employment (in Portuguese, 606Kb PDF) was agreed after 17 hours of discussion. The agreement was signed on 18 January by all the employer confederations:

  • the Confederation of Portuguese Industry (CIP);
  • the Portuguese Trade and Services Confederation (CCP);
  • the Portuguese Confederation of Farmers (CAP);
  • the Portuguese Confederation of Tourism (CTP).

It was also signed by the UGT after the government abandoned its proposal to increase daily working time by half an hour. However, the CGTP again abandoned the meeting, saying the social partners’ compromise was unacceptable and would damage Portugal.

UGT leader João Proença defended his participation in the agreement, which substantially reduces workers rights on a number of issues, by stressing that ‘the government had agreed that it would not try to push through any more labour laws that were not included in the Memorandum of Understanding, or agreed at tripartite level’. However, even the CIP leader, António Saraiva, said: ‘The framework penalises workers.’ He also added that it revolutionised Portugal’s labour laws..

Main issues of the tripartite agreement

Redundancies made easier

Employers now have more room to define the criteria for redundant jobs, and individuals can also be dismissed on the grounds of failing to adapt to organisational or technological changes. In both cases, employers are now no longer obliged to provide the redundant employees with a comparable job.

Reduced severance pay

The Memorandum of Understanding reached with the Troika in May 2011 envisaged:

  • aiming to reduce severance pay for workers with employment contracts signed after November 2011, from a rate of 30 to 20 days per year of service, with a ceiling of 12 months’ compensation and without a set minimum;
  • adapting this system, in the first quarter of 2012, to workers with contracts signed before November 2011, while safeguarding any acquired rights;
  • reducing severance pay for all employees, in the third quarter of 2012, ‘aligning the level of severance payments to that prevailing, on average, in the EU’.

A revised version of the memorandum, in December 2011, changed the last proviso to ‘aligning severance pay with the EU average, i.e. paying between 8–12 days per year of work’.

However, the new tripartite agreement says that workers with employment contracts signed before 1 November 2011 will get severance pay calculated on a basis of 30 days per year of service. The compensation cannot exceed the equivalent of 12 months wages. If the compensation is less than this the worker will receive this value and the new rule will apply until completing a maximum value equivalent to 12 payments. However, the severance pay will now be calculated not on the basis of 20 days per year of service, but will have to align with the EU average. Furthermore, the new law will be mandatory regarding any new employment contracts and collective agreements.

Cuts to unemployment benefit – but coverage is extended

The agreement applies the conditions set out in the memorandum which sets a limit of 540 days for the duration of unemployment allowance (it was previously 900 days). There will, however, be top-ups according to age and contributions, and the new rules will not apply to current employees and unemployed. The current ceiling for unemployment benefit will be cut by 10%, from €1,257.66 to €1,048.05, after the first six months of unemployment and an increase of 10% when couples are unemployed. The number of months in work which are needed to qualify for the allowance is reduced from 15 to 12, and the coverage of the allowance has been extended to self-employed workers who receive at least 80% of their income from a single source. The Government has six months to legislate on the allocation of unemployment allowance to individual entrepreneurs who have not, until now, been covered by the unemployment benefit system.

Reduction in labour costs

The rate for additional hours of work (‘banks of hours’) which was previously set by collective agreements is now to be agreed simply between worker and employer. This will affect two hours per day, limited to 50 hours per week and 150 hours per year, which will no longer be paid as overtime. In addition, the cost of overtime will now be cut. The first hour will be paid at 25% more than normal hourly pay, with subsequent hours at 37.5% extra. Overtime performed on compulsory rest days, weekends and public holidays be paid at 50% more than normal hourly pay.

All these measures will be mandatory for the next two years and will take precedence over all contracts of employment or collective agreements. At the end of these two years, the amounts laid down in collective agreements will again apply – although reduced by half. Four public holidays are also to be abolished, as well as a provision in the Labour Code that employees with good attendance can accrue three days of annual leave to add to the statutory 22 days.

Commentary

The ‘Compromise on growth, competitiveness and employment’ substantially reduces existing labour rights and realises the agenda set in place by the Memorandum of Understanding, with the addition or elaboration of some important details.

The government retreat over the increase of working time by half an hour per day can be seen as a strategy to oblige the social partners, namely the trade union confederation UGT, to make an explicit commitment to the agreement and therefore to make it easier to govern, as discontent about the austerity plans grows among workers and society in general.

Although the UGT leadership sees the agreement as a positive one, arguing that it was a way of avoiding even more severe measures, it is unlikely that workers will accept this argument, and very likely that protests will continue. The UGT might have underestimated this backlash, and the CGTP, who did not sign, are willing to capitalise on the discontent.

An agreement on such terms might, in fact, contribute to undermining the credibility of social concertation in Portugal.

To conclude, the agreement limits collective bargaining autonomy on a number of issues, as well as paving the way for substitute collective regulation by individual agreements between employers and employees.

Maria da Paz Campos Lima, Dinâmia

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