Government of Spain simplifies model contracts to facilitate and incentivise stable employment

 

 

The Minister for Employment and Social Security, Fátima Báñez, announced in the Lower House of Parliament on Thursday that the Government of Spain is working to simplify the various contract models in order to facilitate and incentivise the stable employment of workers. Furthermore, the Employment Act will be re-written to include all existing incentives to job creation.

Through this process of administrative simplification, the 41 different employment contract models that currently exist in Spain will be reduced to a total of 5: permanent contracts, temporary contracts, substitution contracts, work experience contracts, and training and apprenticeship contracts.

During her appearance - at her own request - before the Employment and Social Security Committee of the Lower House of Parliament, Fátima Báñez explained that the existence of such a high number of l contract models and a complex system of employment tax credit schemes is proving to be an obstacle for small business owners.

"It is a problem we will resolve very soon. The technical work is at an advanced stage of completion and negotiation will take place with the social stakeholders", she said.

These changes, which are intended to facilitate the business decision to recruit new employees, maintain existing incentives but present them in a clearer fashion using a single model; whether associated with a permanent, temporary, substitution, work experience or training and apprenticeship contract.

Furthermore, Fátima Báñez explained that the Government of Spain is working to re-write the Employment Act to include all existing incentives to job creation. The minister stressed that the inclusion within a single legal text of all incentives to job creation - as opposed to the currently existing regulatory dispersion - will increase awareness of them among both workers and employers.

Labour reform report

The minister highlighted the fact that the labour reform assessment report is an unprecedented exercise in analysis and transparency, and meets a commitment that was included in the law itself at the time of its approval.

In this regard, Fátima Báñez said that the Ministry of Employment and Social Security has undertaken a rigorous analysis that highlights the changes already evident in the way the labour market operates and which have led to an increase in competitiveness. By way of example, Fátima Báñez cited recent news from the automotive sector, the chemical and pharmaceutical sector, the IT sector, and the iron and steel industry - mentioning such specific cases as Ford, Renault, Opel Nissan, Lilly and Fujitsu, which are maintaining a commitment to Spain by investing in the country and hence creating jobs. These figures demonstrate that the Spanish economy is once again attracting investment due to increased competitiveness and that this increased competitiveness is leading to improvements in the Spanish trade balance.

Slower pace of job losses

The minister said that the labour reform has slowed the pace of job losses and unemployment growth within a highly adverse macroeconomic climate. As a result, the annual rate of unemployment growth has fallen from 17.8% to 5% since the reform was approved.

Recorded unemployment fell by 149,909 between January and July - the largest decrease in this period since 2004, a year with significant economic growth that led to a fall in unemployment of 167,000.

For the first time since the economic crisis began, lesser economic growth has not led to faster job losses. In this regard, she stressed that the study drafted by the Ministry of Economic Affairs and Competition and included in the report states that the reform has avoided the loss of up to 225,000 jobs.

The same study also states that the labour reform will enable the creation of jobs based on a more moderate level of economic growth - between 1% and 1.2% of GDP, far lower than the 2% or 2.5% prior to the reform.

In turn, the labour reform has helped make the Spanish economy more competitive, making Spain a more attractive country for investment.

The wage moderation achieved since the reform and the second agreement on employment and collective bargaining signed by the social stakeholders has enabled a complete recovery of the unit labour cost competitiveness lost since 2005 when compared with the other major European economies.

In the 12 months following the labour reform, Spain has been the developed nation with the highest gain in relative competitiveness. Consequently, and in spite of the recession, direct foreign investment rose by 3.7% in 2012.

Reducing duality in the labour market

The minister stressed that the labour reform is enabling progress on the path to reducing duality in the labour market, even in an adverse economic climate of recession and credit crunch. Hence, the temporary employment rate has fallen from 25% in the fourth quarter of 2011 to 23.1% in the last quarter.

The number of permanent employment contracts fell less sharply in the 12 months following the reform in spite of the adverse climate and significant uncertainty. Furthermore, the number of initially part-time permanent employment contracts increased by 4.8% and the number of part-time contracts increased by 3.3%.

An increase of 8.3% has also been recorded in the number of conversions to permanent part-time employment contracts in the first 12 months of the labour reform, which compares with a reduction of 6.7% in the previous period.

However, the minister underlined the need to introduce new incentives into this process through the simplification and clarification of model contracts.

Alternatives to dismissal

The reform facilitates the replacement of employment contract termination with temporary contract suspension or work hour reductions, meaning that the number of workers affected by collective redundancy measures has fallen from 19.5% of the total in the 12 months before the reform to 16.5% in the following 12 months.

In the 12 months prior to the labour reform, the number of workers affected by collective redundancy measures rose by 13% more than the number of workers affected by temporary measures. This trend was reversed following the reform and the increase in the number of workers affected by temporary measures was 23 points higher than the increase in the number of workers affected by redundancy.

Meanwhile, in the first half of 2013, the number of workers affected by collective redundancy plans fell by 15.1% on the same period of the previous year. The number of companies affected by collective redundancy measures has fallen by 19% and the number of such measures has fallen by 13.3%.

These measures continue to be adopted following an agreement at a rate of 93.5% in the first half of 2013, compared with a rate of 91.7% in the first half of 2012.

Collective bargaining

Finally, the minister stressed that reform has given a boost to collective bargaining procedures. The reform has put in place options for more ongoing negotiation that is more closely-related to the company, more dynamic and more favourable to employment and competitiveness.

The end of indefinite "ultra-activity" [ultraactividad] - whereby the content of an agreement is extended beyond expiration until a new agreement is in place - has enabled significantly dynamic negotiating activity in the early months of this year. This has led to the conclusion of negotiation processes on which no progress had been made for years, reaching fundamental agreements for the maintenance of jobs and facilitating recruitment decisions.

Collective bargaining agreements are being reached at a faster pace. 641 agreements were signed in the first half of 2013, compared with 359 in the same period of 2011 and 371 in the same period of 2012.

It has been possible to use the non-application of an agreement as a way to adapt to the conditions of a company. There have been 2,300 cases of non-application at companies since the labour reform, affecting almost 140,000 workers.

Such non-applications have been recorded at an increasing rate and almost double the number recorded in the whole of 2012 was recorded in the first half of 2013. Furthermore, the vast majority of cases involving the non-application of a collective bargaining agreement were the result of an agreement between employers and employees (96%).