Industrial relations

Spain: Latest developments in working life Q3 2019

The caretaker government’s efforts to tackle precarious employment, wage increases in a slowing economy, and the impact of the political stalemate on social dialogue are the main topics of interest in this article. This country update reports on the latest developments in working life in Spain in the third quarter of 2019.

Government intensifies fight against precarious employment

The Spanish parliament has been fragmented since the elections in April 2019, with no party capable of forming a government. Negotiations in July and September were both unsuccessful, leading to a call for new elections.

A caretaker government has been in place throughout this process, making it impossible for any new labour market policies or regulations to be developed. In spite of this, the government launched a campaign in August to continue the fight against precarious work (a similar campaign was implemented in the last quarter of 2018). In particular, the Ministry of Labour, Migrations & Social Security launched a two-step action against the abuse of temporary contracts – one of the greatest causes of precariousness – and excessive working hours in part-time contracts.

During the first stage, the ministry will send warning letters to companies suspected of infringing the law in relation to the abuse of temporary contracts or working time for part-time workers. In the second stage, if no action has been taken by these companies, the Labour Inspectorate will step in.

While it is likely that the caretaker government launched this campaign because it was unable to implement any new regulations or policies, the campaign was also in response to an increasing awareness that the level of temporary employment in Spain remains high despite three decades of labour market reforms. For this reason, stricter control through the Labour Inspectorate is considered a key element to effectively fighting against precarious work.

Boost in wages while economy starts to slow

In the second quarter of 2019, the nominal wage increased by 2.1% compared to the same period in 2018. This increase was the largest since the end of 2009. In this way, wage increases are gaining momentum at a time when the economy is beginning to show signs of deceleration following over four years of uninterrupted growth.

Three factors have helped to push wages up and make a positive contribution to demand and growth. The first is the agreement that was reached last year between the most representative social partners, which stipulated that wages negotiated via collective agreements would increase by a minimum of 2% every year between 2018 and 2020 (with the option of an additional percentage point increase dependent on criteria such as productivity or the reduction of unjustified absenteeism). In addition, this agreement included an increase in those earning the lowest salaries of up to €1,000 gross per month in 14 payments per year, or €14,000 per year.

The second factor is the 22.3% increase in the statutory minimum wage of up to €900 per month, which came into force from 1 January 2019.

The third factor is that public employees have experienced real wage increases after several years of cuts and freezes. For this group, the increase in remuneration in 2019 was initially 2.25%. Then an additional 0.25% increase was added, due to the good economic performance in 2018.

Political stalemate puts social dialogue on hold

The ongoing political deadlock, with four elections in four years, is having a negative impact on social dialogue processes and outcomes. This was particularly clear with the fourth peak-level, cross-sectoral agreement on employment and collective bargaining, which was signed in July 2018. The agreement provided general guidelines for wage setting over the period 2018–2020. The agreement also identified 10 areas where social partners agreed on the need to develop social dialogue together with the government to tackle some of the most important challenges in the labour market and the economy. The social partners:

  • asked for an agreement to be reached on vocational training
  • requested legal changes from the government to enable employment contracts to be terminated once employees have reached the retirement age
  • proposed to create an observatory to control absenteeism
  • proposed a plan to combat the informal economy
  • proposed a package of measures to promote equality between men and women

One year after the agreement was signed, most of these key areas remain largely underdeveloped. Even though the government approved a decree to monitor working time, as well as the obligation for companies with more than 50 employees to develop equality plans, social partners feel that these measures are insufficient. They are keen to see a new government formed as soon as possible to give new momentum to social dialogue on these issues.

Outlook

In December 2018, the government and trade unions signed a memorandum of understanding, from which the employer organisations were excluded, to revoke the ‘most harmful aspects’ of the 2012 labour market reform. It was agreed, among other matters, to re-establish the ‘ultra-activity’ principle (continuation of a collective agreement beyond its expiry date), as well as the prevalence of sector-level over company-level agreements. Resistance from the employer organisations, together with the political stalemate, have prevented the caretaker government from making any move in this direction. Instead, the government has declared that rather than remove the labour market reform, it would be better to launch a new workers’ ‘statute of the 21st century’ in the event that it is successful in the new elections that are due to take place in November 2019.

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