Portugal: Social partners involvement in unemployment benefit regimes

  • Observatory: EurWORK
  • Topic:
  • Social protection,
  • Published on: 20 December 2012



About
Country:
Portugal
Author:
Maria da Paz Campos Lima
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Social partners have been involved in the unemployment benefit system, although in Portugal they do not have the autonomy and the power to design it bilaterally and they do not have the competence of collecting contributions and delivering benefits, which is a prerogative of social security. Their major role relates: to i) influencing the process of decision making, including through their participation in tripartite social concertation at the CPCS, which has been over the years the forum for regular discussion of labour market reforms in general, and UB in particular ii) Furthermore they play an important role in the IEFP, public institute which has the competence of managing public services of employment, job centres and vocational training centres. They participate at all levels, national, regional, local in the existing tripartite bodies. Trade union confederations in particular have been following with great concern the developments in the system. The major shift has been in recent times, since 2010, a reduction of unemployment protection especially regarding its duration, amount, and conditionality’s. In 2011 the Troika Memorandum imposed even stricter rules, which were started to be implemented by the law published in March 2012 under de government of the centre right wing coalition.

QUESTIONNAIRE

1.1. Recent changes/transformations of the UB system

The UB framework in Portugal comprises an insurance-based compulsory unemployment benefit (UI) related with the contributory career for the social security system; and an unemployment assistance system providing unemployment social allowance (UA), means tested. Social assistance (SA) was the latest tool introduced, launched in 1996 by the Socialist government with the creation of the Guaranteed Minimum Income, called later Social Insertion Income, which is means tested and dependent on taxation.

Regarding the Unemployment Insurance and Assistance

In 1999, during the government of the Socialist Party, the legal framework regarding UB was changed by Decree Law 119/99. The law increased the duration of the concession of UI considering not only the beneficiary's age, but also their contributory careers, in the case of those aged 45 years or more, for whom the period of 30 months they were entitled to receive UI, could be extended, adding two months for each group of five years of contributions. A particular concern with persistent unemployment among older workers was the reason for this change. Actually the same law provided also for the regulation of early access to old-age pension. Another innovation was the introduction, in addition to the two types of unemployment benefit i.e. the UI (contributions from employees) and the UA for those not entitled to the former, of a new type the partial UI (‘subsídio de desemprego parcial’), an active measure, enabling the recipients of UI who could access a part-time jobs to receive a partial UI.

In 2003, the right wing coalition PSD/PP prepared a revision of this law including stricter rules namely in relation to the jobs unemployed were obliged to accept, but due to the suspension of the parliament in 2004 the bill was not approved.

In 2006, the new socialist government decides to revise the legal framework on UI and UA in order to deal with changing economic conditions, with the challenges faced by the social protection systems and looking forward rapid activation of workers who are temporarily unemployed ‘considering that passive measures must have the length of time strictly needed to make it possible the return to the labour market, mechanisms of activation of beneficiaries are envisaged, reinforcing with this aim the action of public employment service’. The main changes introduced were the following:

  • Strengthening the role of the employment centres in monitoring its target beneficiaries in line with quick integration into the labour market, by establishing guidelines to improve the employability of the beneficiaries and introducing the Personal Employment Plan (Plano Pessoal de Emprego, PEP);
  • Recipients of unemployment benefits are required to fulfil their duties towards promoting their employability as the obligation of active search of employment and biweekly presentation;
  • New regulations regarding the ‘suitable job’ recipients are obliged to accept are provided aiming at a rapid return to the labour market. Nevertheless recipients could refuse job offers without losing their benefits if their gross amount was below the UI plus 25% (in the first six months), or below 10% in the following period.
  • Access rules to retirement (in line with the evolution of life expectancy) after unemployment were changed in order to encourage workers to remain in the labour market.
  • UI duration increases with age and contributory record after the last subsidized unemployment, from a minimum of 270 days (for the individuals less than 30 years old with shorter careers) to a maximum of 900 days plus 60 days for each group of five years of contributions the last twenty years (for the individuals over 45 years old with longer careers).

In 2009 and in 2010, when unemployment rose as a result of the international crisis, the socialist government proposed amendments to the UB set up by law no 220/2006 introducing exceptional temporary measures to tackle the crisis, in line with Employment Initiative 2009 and 2010. In March 2009, Decree 68/2009 temporarily extended by six months the period during which claimants were entitled to receive the UA, after the expiry of their entitlement to UI. In June 2009, Decree 150/2009 and in March 2010, Decree 15/2010 extended that period successively by six months. Another measure in December 2009, Decree 324/2009, reduced the number of days a claimant must have worked to be eligible for UI from 450 to 365 days (PT0906029I; PT1001059I).

However, following austerity policy of PEC 2010-2013 those exceptional measures were withdrawn by the socialist government with the support of centre right wing parties. Furthermore, the socialist government decided to make additional changes in relation to the unemployment benefit system, which were comprised in the Decree No 72/2010 published on 25 June 2010 (PT1005029I). The Decree 72/2010 defined that beneficiaries have to accept jobs with a gross salary 10% or more above the value of the UI during the first year of unemployment; or after 12 months out of work they have to accept a gross salary equal to the UI benefit. If they reject such a job offer, they lose their entitlement to UI. The new decree also limits unemployment benefit to a maximum of 75% of the claimant’s previous wages and to no more than three times the value of the social support index (IAS), which in 2010 was set at €419.22 a month. Finally, this decree set up a more flexible unemployment benefit regime by allowing part-time workers and, in some circumstances, self-employed workers with low levels of income, to accumulate partial benefit rights.

Under the Memorandum of Understanding to tackle public finances signed with the European Union, European Central Bank and International Monetary Fund new challenges to the unemployment protection system came forward, reversing the quality of protection, in terms of reducing the duration of UI to no more than 18 months and reducing the amount of the UI capping unemployment benefits at 2.5 times the social support index (IAS) and introducing a declining profile of benefits over the unemployment spell after six months of unemployment (a reduction of at least 10% in the benefit amount).

In contrast, the Memorandum envisages the extension of UI to a larger number of beneficiaries by ‘reducing the necessary contributory period to access unemployment insurance from 15 to 12 months’; and by extending eligibility to UI to clearly-defined categories of self-employed workers providing their services to a single firm on a regular basis.

The right wing coalition PSD/CDS that came into power drafted legislation in line with these requirements and on 15 March 2012 was published the Law no 64/2012. UI duration varies with age and contributory careers, from a minimum of 150 days for younger beneficiaries with shorter career to a maximum of 540 days for the older beneficiaries with long careers. Reduction of the amount of UI follows the terms of the Memorandum and UI amount is limited to a maximum of 65% of the claimant previous wage and cannot be above 2.5 IAS. After 180 days of receiving UI daily payment declines by 10%. In the situations where both members of the couple are beneficiaries and have dependent children or are single parents the law sets an increase of the UI by 10 %.

Over the years, the changes in the UB system have always been the result of government initiative. However social partners were consulted previously in the framework of the Standing Commission for Social Concertation (CPCS), in order to reach agreements, and they participated actively in the public debate. The last changes in the UB system on 15 March 2012 did not result exclusively from the government initiative but also from the Memorandum of Understanding. In the next section we highlight the outcomes of social concertation and positions of social partners on the successive reforms of UB.

Regarding the Social Assistance

The Social Insertion Income (formerly Minimum Guaranteed Income) is focused to support individuals or families in situations of great economic need. The Social Insertion Income (SII) is both a benefit, part of the Social Welfare sub-system of the Public Social Security System, and an insertion programme, with an aim to provide individuals and their households with the means tailored to satisfy their basic needs and allow for a progressive insertion in the labour market.

The SII is means tested and it is funded by taxes. If the beneficiary lives alone the SII cannot be superior to € 189.52 per month; if the beneficiary is part of a family household, the household is entitled to receive more € 132.66 for each adult and € 94.76 for each child, per month.

Social partners participated in the monitoring of SII in the framework of the Comissão Nacional do Rendimento Social de Inserção (CNRSI), a body of the social security system, which has been abolished by the centre right wing coalition in 2012.

Social partners’ reactions

The reactions of the social partners to the 1999 UB reform were in general positive, in particular from the side of trade union confederations. It is important to recall that the reform of UB was in line with principles of the reform of social security launched by the Law no.17/2000, which was approved by the centre-left and left parties in the parliament. In addition, the reforms were the result of the strategic tripartite agreement (Acordo de Concertação Estratégica) 1996-1999.

The government proposals for the 2006 UB reform generated a mixed reaction from social partners at CPCS (PT0604029I), in particular in relation to the proposal that a worker could receive unemployment benefit along with severance pay when a labour contract ends by mutual agreement although with some limitations i.e. when companies face financial problems and only for a certain number of workers. This raised controversy dividing the trade union confederations side and the employer confederations side. It received the active support of the General Workers’ Union (UGT) and of Confederação do Turismo Português (CTP) but the reticence of the General Confederation of Portuguese Workers ( CGTP-IN) and the clear opposition of the Confederation of Portuguese Industry (CIP). CGTP showed concern that the cumulative scheme could pave the way for collective dismissals, at the expense of the social security system; on the contrary, CIP was against the limits set by the government to the cumulative scheme arguing that they would undermine the possibility of company restructuring.

The temporary exceptional measures on UB launched in 2009 and 2010 were actively supported by trade union confederations, which opposed to their subsequent withdrawal by the government. In addition, the trade union confederations opposed to 2010 UB reform in relation to two major issues: the change of the basis of calculation of UI, limiting it to no more than 75% of the net amount earned during the claimant’s previous job, instead of the previous maximum of 65% of gross earnings; and the obligation of beneficiaries to accept a job offer, which wage could be just 10% higher than their UI (when previously the wage had to be 25% higher).

When the centre right wing coalition came to power and started the process of reform of UB in line with the Troika Memorandum of Understanding, the room for negotiations with the social partners seemed very limited. The government included the proposal on the reform of UB in a large package of labour reforms i.e. proposal on a ‘Compromise on growth, competitiveness and employment’ to be discussed at the CPCS. The UB reform proposal, in line with the Memorandum of Understanding, was part of the final tripartite agreement ‘Compromise on growth, competitiveness and employment’ signed by all the social partners with the exception of CGTP. Of the labour reforms envisaged in the agreement, the reform of the UB was the first one to see the light of the day; the Law no. 64/2012 was published already on 15 March 2012, one week before the general strike called by CGTP against government labour reforms.

1.2. The main characteristics of the UB system as it is now

1.2.1. Unemployment Insurance.

  • Coverage: All economically dependent workers are covered. Self-employed are covered when they provide services to a single firm on a regular basis.
  • Eligibility: Claimants of UB must be in a situation of involuntary unemployment, have to be capable and available for employment and registered at the employment office. The condition for UB eligibility is 360 days of contribution (employment) record in the last 24 months before unemployment.
  • Duration: Minimum duration 150 days; Maximum duration 540 days.
  • Replacement rates: The unemployment benefit amounts to 65% of reference earnings up to a limit of 2.5 times the IAS (€419.22) a month, and cannot be inferior to the value of the IAS.
  • Financing: As a rule, the rate of employee contributions (Social security contribution s) is 11 per cent of gross pay, with no ceiling; and thee mployer’s rate of social security contributions is 23.75 per cent of gross pay, with no ceiling.
  • SP involvement: Social partners represented in the CPCS are involved as legitimate representative organisations.

1.2.2. Unemployment Assistance.

  • Coverage: All workers which unemployment insurance expired or that are not eligible for it due to a short employment record, involuntary unemployment.
  • Eligibility: Involuntary unemployment; have to be capable and available for employment and registered at the employment office. The condition for UA eligibility is 180 days of contribution (employment) record in the last 12 months before unemployment. In addition the UA is means-tested, i.e. the monthly income per capita of the claimant’s household cannot exceed 80% of IAS (€419.22).
  • Duration: Follows the same rules as UI.
  • Replacement rates: the UA is related to the value of the IAS and family type: 100% for household beneficiaries; 80% for single beneficiaries.
  • Financing: The same as UA but means tested
  • SP involvement: All those represented in CPCS i.e., CGTP, UGT, CIP, CTP already mentioned and the Portuguese Trade and Services Confederation (CCP), the Portuguese Confederation of Farmers (CAP).

2. SP involvement in the UB regime

2.1. The development phase

The social partners regularly participate in the preparation of legislation concerning the unemployment benefit system through the participation in CPCS (see above), and public discussion; Social partners represented at the CPCS participate also in IEFP, the public institute, with administrative and financial autonomy, which is responsible for the management of the network of job centres and employment and vocational training centres. Social partners are represented in the board of directors, in the audit board, in the regional advisory councils and in the advisory councils of the vocational training centres.

2.2. The implementation phase

See above.

2.3. The management phase

Social partners are involved in the management phase as long as they are totally or partially responsible for the organisational asset behind the provision of UB. See social partners’ participation in IEFP. IEFP has financial autonomy in the sense of defining how the budget they are entitled to will be managed. But the role of IEFP is not collecting contributions and delivering benefits, a role that is the competence of the Social Security. Certainly, restrictive financial reforms have challenged the budget attributed to IEFP, and staff has been reduced, namely temporary employees.

Social partners are not engaged, however, in the financial management of the unemployment benefits funds.

Social partners’ role is also linked to training within the context of autonomous centres for vocational training, via IEFP which runs the Public Employment Service.

2.4. The monitoring phase

The social partners are involved in the monitoring and evaluation of the UB system in the context of IEFP.

IEFP issues regular information not only about unemployment trends but also about the performance of Job Centres. In addition, public bodies in charge of statistical analysis and labour market studies have been producing regular evaluation (for instance about the implementation of National Employment Plans) and also producing ad-hoc studies on a number of issues which relate to the UB system and employment policy. Furthermore, external evaluation about the implementation of specific measures – for instance about active employment policies – has been carried on mostly by university research units, after public calls for tender.

Social partners may offer recommendations but they do not have the power of defining rewards and sanctions.

The extension and relevance of social partners’ role in the assessment process depends of the issue. But social partners have been following up closely the assessment reports, in particular in relation with the implementation of the National Employment Plans and the European Employment Strategy.

The role of social partners within the unemployment benefit system is not subject to evaluation or monitoring.

3. Final observations

3.1. Public debates and policy discussion:

Ongoing debates have not been focused on SP involvement in UB system, which suggests that there is a consensus about the role and competencies SP have in the system. Mostly the debate with social partners and between them has been about the level of protection of the UB system to respond to escalating unemployment; about the sustainability of the system; and about employment creation. The most controversial issues have been those related with the reduction of the duration and the amount of benefits defined by the Memorandum of Understanding, and its impact in times of escalating unemployment. Also the MU requirement of cutting down employer’s contributions for social security has been raising the concern with the sustainability of the system. More recently the state budget proposal for 2013 and the envisaged dramatic cuts on social expenses raised again this concern in particular for the trade union confederations.

3.2. Research:

Dornelas, António (Coord.) 2011. Emprego, contratação coletiva de trabalho e proteção de mobilidade profissional em Portugal [Employment, collective bargaining and protection of professional mobility], Gabinete de Estratégia e Planeamento, Ministério do Trabalho e da Solidariedade Social (MTSS).

Campos Lima, M. P., Molina, O., Stoleroff, A. and Martin Artiles, A., 2012, “Crisis and austerity in Portugal and in Spain: increasing flexibility and reducing security”, paper presented to IREC conference 2012, Lisbon.

Dias, M. C. and Varejão, J., 2011, Estudo de avaliação das Políticas Ativas de Emprego [Assessment Study of Active Labour Market Policies], Faculdade de Economia, Universidade do Porto.

3.3. Other issues:

More recently the government tried to change substantially the rules regarding contributions for social security (including UB). However, its plan, announced on 7 September 2012, to reduce social security contributions made by employers by 6% and to raise workers’ contributions by 7% faced a strong opposition of both trade union confederations and employer confederations, and the government had to withdraw the proposal (PT1209019I).

4. Commentary

4.1. Assessments and comments:

The Memorandum of Understanding defined detailed conditions regarding the UB system that limited the effective capacity of social partners to define alternative solutions more in line with the required protection of unemployed and long term unemployed. Furthermore, in addition to reversing the quality of protection for unemployed people in terms of UB duration and amount, the memorandum measures aim at facilitating redundancies, giving more room for collective and individual dismissals. Social partners, in particular trade union confederations, have been very concerned with the changes in the UB system. Changes in labour law reducing employment protection were clearly welcomed by employer confederations, while trade union confederations were divided over this issue, supported with reserve by UGT and facing CGTP strong opposition. Eventually, by combining a policy to decrease UB duration and amount with a policy of reducing employment protection, the centre right wing government abandoned clearly any kind of ‘flexicurity’ strategy. The risks in terms of poverty and social exclusion are enormous.

4.2. Perceived strengths and weaknesses:

The legal framework gives ample room for social partners’ involvement in the development phase at the national level, through their participation in the Standing Commission for Social Concertation. In the implementation and in the management phases their capacity is more limited. However, in practice, even the capacity of social partners at the national level has been limited insofar the government has not been considering any kind of possible alternatives to the measures envisaged by the Memorandum of Understanding, in order to promote social protection and employment and further investment in vocational training.

Maria da Paz Campos Lima, Dinâmia

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