Temporary employment examined

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Nearly a third of Spanish employees are on temporary contracts, a far higher level than anywhere else in the EU. This article reviews the current situation in this area, as at autumn 2004. It outlines the various types of temporary contracts allowed by law, statistics on their use, the role of collective bargaining and the views of the social partners and government.

Spanish law provides for 10 types of temporary employment contract (TN0202101S) - brief details are provided in table 1 below.

Table 1. The 10 types of temporary employment contract
Type Characteristics Duration
Training contract (contrato para la formación) For people without university degrees, employer must provide training. 6 months to 3 or 4 years
Work placement contract (contrato en prácticas) For workers with university degrees or medium to high vocational training, employer must provide training and certificate of professional achievement. 6 months to 3 or 4 years
Contract for specific works or services (contrato de obra o servicio determinado) For work that is limited in time and of indefinite duration. Collective agreements may identify the jobs or tasks that can be covered with this type of contract. Undetermined
Contract for circumstances of production (contrato eventual por circunstancias de la producción) To meet circumstantial requirements of the market, even if this involves the normal activity of the company. The activities for which these contracts can be used may be determined by collective agreements. The maximum duration of these contracts and the period within which they can be applied may be modified by collective agreement, within limits defined by law. Maximum of 6 months
Internship contract (contrato de interinidad) Aimed at temporarily replacing workers who are entitled to return to their jobs, or covering a job during the selection or promotion process, after which the post will be filled definitively. Common in the public administration. Depends on case
Contract for replacement of a worker taking early retirement (contrato en sustitución por anticipación de la edad de jubilación) Aimed at recruiting unemployed workers for a minimum of one year to replace workers retiring at the age of 64 instead of 65. Minimum of a year
Hand-over contract (contrato de relevo) Aimed at unemployed workers or existing employees with a fixed-term contract, who partially replace a worker who takes partial retirement whilst working part-time in the company. Undetermined, or equal to the time remaining until the replaced worker reaches retirement age
Integration contract (contrato de inserción) For unemployed workers participating in public programmes to carry out 'works and services of general and social interest'. Depends on programme concerned
Availability contract (contrato de puesta a disposición) Used by temporary employment agencies to offer workers to provide services in user companies. 6 months or the duration of the work concerned

Levels of temporary employment

According to the Survey of the Active Population (Encuesta de Población Activa, EPA) conducted by the National Institute of Statistics (Instituto Nacional de Estadística, INE), in the second quarter of 2004, 30.36% of employees had temporary employment contracts (and 69.64% had open-ended contracts). This compares with an average rate for the EU 15 of around 13% (according to Eurostat figures for 2002). Also according to the EPA (fourth quarter 2003), 99.27% of people in employment work in activities that are characterised as being 'continuous' in nature. Given that over 30% of employees are on temporary contracts, commentators argue that this indicates a high level of abuse of temporary recruitment.

Most temporary contracts concluded are for 'works and services' and 'circumstances of production', which together represent 87.5% of the total - see table 2 below.

Table 2. Type of temporary contracts registered in 2002 (% of all temporary contracts)
Contracts for works or services 39.23%
Contracts for circumstances of production 48.33%
Internship contracts 7.78%
Work placement contracts 0.61%
Training contracts 0.98%
Contracts for people with disabilities 0.07%
Contracts for replacement of workers taking retirement at 64 0.01%
Integration contracts 0.41%
Hand-over contracts 0.06%
Partial retirement contracts 0.05%
Others* 2.47%

* Includes others not specified above, special recruitment systems for artists, domestic service etc, and those contracts that have formal defects or fail to meet basic requirements.

Source: Anuario de Estadísticas Laborales y de Asuntos Sociales (AELAS). Ministry of Labour and Social Affairs (Ministerio de Trabajo y Asuntos Sociales, MTAS).

Temporary employment is concentrated in services, where 80.4% of the temporary contracts are for works and services - see table 3 below. According to the Ministry of Labour and Social Affairs, the level of temporary employment in industry is comparable to averages elsewhere in the EU.

Table 3. Temporary contracts by type and sector of activity, 2002 (% of all temporary contracts)
Type Agriculture Industry Construction Services
Works or services 39.23% 27.77% 34.87% 80.44%
Circumstances of production 48.33% 62.27% 56.96% 16.95%
Internship 7.78% 0.18% 3.65% 0.44%
Work placement 0.61% 0.02% 1.19% 0.41%
Training 0.98% 0.04% 1.67% 1.14%
People with disabilities 0.07% 0.01% 0.16% 0.04%
Replacement of workers taking retirement at 64 0.01% 0 0.03% 0
Integration 0.41% 0.02% 0.04% 0.28%
Hand-over 0.06% 0 0.41% 0.01%
Partial retirement 0.05% 0 0.4% 0.01%
Others 2.47% 9.69% 0.62% 0.28%

Source: MTAS.

The duration of 39.6% of temporary contracts is undetermined, and this figure rises to 85.7% for contracts of works and services - see table 4 below. The duration of 30% of the contracts is less than a month.

Table 4. Duration of temporary contracts registered, 2002*
1 month or less 1 to 3 months 3 to 6 months 6 to 12 months Over 12 months Undetermined
30.03% 15.66% 11.68% 2.76% 0.25% 39.62%

* The duration is that specified at the time of registration or extension.

Source: MTAS.

Temporary contracts and collective bargaining

In 1994, collective bargaining began to deal with temporary contracts to a greater extent than previously (see Wilfredo Sanguinetti in La negociación colectiva en España: una visión cualitativa, R Escudero (ed), CC.OO, 2004). In the 1990s, the legislation in force did not encourage collective bargaining to limit the use of temporary employment, but rather to promote it. Collective agreements made the use of these contracts more flexible in order 'to adapt to the needs of sectors and companies', thus downplaying the requirement to justify the use of each type of contract.

Law 63/1997 on urgent measures to improve the situation on the labour market (ES9706211F) slightly limited this tendency by allowing collective bargaining to control the use of temporary contracts. Collective agreements were given the power to regulate temporary contracts, by a revised Article 15 of the Workers' Statute, but some commentators argue that in general they failed to introduce sufficient limits and guarantees to prevent unjustified use. A labour market reform in 2001 (ES0103237F) did not refine the definition of the justification of temporary contracts (it only introduced limited compensation for the dismissal of workers on temporary contracts, amounting to eight days' pay per year worked). From 2002, without altering the trend, slight changes have been introduced in some collective agreements, such as clauses limiting repeated renewal of temporary contracts. Agreements tend to include positive declarations of intentions, but observers argue that their content does not always pursue the aim of employment stability.

According to the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO), contracts for 'specific works or services' are used abusively - especially in sectors such as retail, hotels and catering - as a temporary contract of undetermined duration for any task interpreted as 'extraordinary'. The Supreme Court (Tribunal Supremo) has found on several occasions that it is sufficient to refer to the contractual situation of the employer in relation to third parties rather than the continuity of business activity in order to justify the use of this type of contract. Clauses in collective agreements limiting the use of temporary contracts are exceptional. They tend to specify the types of contracts and the reasons for them, but not to give a precise definition of the tasks involved. Abuse of these contracts is, it is claimed, habitual in sectors such as cleaning, security, telecommunications and construction, and their use is justified by stating that the employer's activity consists of providing works or services requested by customers 'in an individualised and temporary fashion'. This has been the pretext for authorising the use of contracts for works and services, even though the usefulness of the good or service is lasting for the customers, and the activity of the company is continuous. Company agreements dealing with these matters include those at Alcatel Integración de Redes or Jesytel.

Temporary contracts for 'circumstances of production' are regulated by a variety of collective agreements (particularly in retail, hotels and catering) with the aim of increasing their duration - sometimes, according to critics, violating the spirit of the law.

Assessments and views

According to Valeriano Gómez, the secretary general for employment at the Ministry of Labour and Social Affairs'after the 1997 intersectoral agreement for employment stability [ES9706211F], the costs of open-ended contracts in real terms, even taking into account the cost of dismissal over a period of five years, are no higher than the costs of temporary contracts. Taking into account the applicable allowances, the cost is no greater for open-ended contracts than for temporary ones.' Mr Gómez feels that temporary employment has become a part of the business culture, and to combat this the Ministry is currently proposing to reinforce the 1997 agreement by facilitating the convergence of costs between open-ended and temporary contracts (ES0406102N and ES0404102N).

Employers argue that employment stability can be increased by reducing the labour costs - in terms of social contributions and compensation for dismissal - attached to open-ended contracts, in order to make them more attractive. Employers seek to meet their needs for flexibility, attempting to link the structure of their workforces to their income. Some observers argue that employers tend to create economic and psychological dependence among their workers by using temporary contracts as a trial period.

In the opinion of Wilfredo Sanguinetti (cited above), trade unions could use collective bargaining to promote the appropriate use of temporary employment. This would involve:

  • better specifying the justification for use of temporary contracts, by defining which company activities are continuous or otherwise unsuitable for the use of such contracts;
  • linking temporary contracts to periods of seasonal work, where appropriate;
  • laying down the maximum share of the workforce that may be made up of temporary workers;
  • providing higher compensation for dismissal of temporary workers than the statutory eight days' pay per year of seniority; and
  • introducing clauses that limit repeated renewal of temporary contracts in order to favour their conversion into open-ended contracts.

Commentary

Spain is the EU Member State with the highest temporary employment rate. Though open-ended contracts are increasingly cheap, less protective and less stable, the use of temporary contracts is high and resistant to measures aimed at reducing it. This is due to flexible regulation, lack of rigour in the interpretation of agreements, favourable case law, and the fact that employers use temporary contracts to try workers out without making a commitment.

Since the 1980s, governments have introduced flexible regulations, thus favouring a system of employment that is more flexible for employers and more rigid and unstable for workers. This system has transferred part of the responsibility for regulation to collective bargaining. Workers' representatives have adopted a strategy of adaptation due to a perceived need to maintain a number of long-term temporary workers in the company without forcing their conversion into workers on open-ended contracts, and temporary contracts may be seen as inevitable, or as a lesser evil than the alternative of subcontracting (ES0405107F), which involves precarious employment. They are arguably wrong in assuming that a cheaper and more flexible labour model conserves and creates employment, something which in fact depends mainly on the prospects of profit and the level of business. (Daniel Albarracín, CIREM Foundation)

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