The latest labour reforms in Spain (II).

Second question. What are the most important changes that have been introduced by these reforms and what has been their impact on flexibility and job market segmentation in Spain?

A) The new standards intend to reduce labour market segmentation and make temporary hiring harder. For example contracts for specific projects or services will be for a maximum duration of three years (or four years if negotiated by collective agreement).


The contract to promote indefinite hiring can be formalized with the majority of workers. The severance payment for unfair dismissal is lower than in a standard permanent contract.

There is a wide regulation to terminate the contract for economic reasons. However the development of new rules has again established more limits and has been criticised by business organizations. If the Popular Party wins the upcoming election on 20 November, it is highly likely that the regulation on the termination of this type of contract will be made more flexible from the business’ point of view.

The compensation for termination of a temporary contract will be increased from 2012. Additionally, the Wage Guarantee Fund contributes to part of the termination payment in cases of termination of contract by reason of redundancy or economics reasons

B) The new rules on substantial modifications to working conditions have given businesses a greater power. The new regulation on collective bargaining agreement allows an employer to use 5% of working time as they deem appropriate (this 5% can be increased by collective agreement).

There has been an increase in the number of possibilities available to employers to temporarily suspend a contract and/or to reduce the number of working hours as an alternative to terminate contracts.

C) The regulation of active employment policy encourages, with economic benefits, the hiring of two groups: unemployed young people with serious long-term employability problems and unemployed individuals over 45 years old.

It also establishes a policy of direct attention to the unemployed, although the low number of public servants in the employment department makes it very difficult to implement a measure of offering individual and personal attention to improve their employability.

However, fixed term contracts (for specific works, services or casual production needs) are still the most widely used type of contracts in Spain. The "culture of temporality" that developed in Spain over 27 years ago is still in force. The provision of economic incentives for the conversion of temporary contracts into permanent contracts is another one of the measures taken during the labour reforms in mid-2010 and mid-2011.

D) There have been no modifications to the “express disciplinary dismissal”, the most important (and expensive) way to terminate a contract without reason in Spain. In Spain, there is almost total flexibility in terms of termination of an employment contract, although this flexibility may come at a considerable expense.

Third question. What are the alleged obstacles to the smooth functioning of the labor market in Spain according to the government (National Reform Programme, April 2011)? Are these obstacles real, not only in law but also and above all in everyday life?

Let’s analyze the Government's arguments one by one.

Argument 1. Segmentation of the labour market, with one-third of employees subject to temporary contracts with excessive turnover, which limits improvements in business productivity.

Response. In my view, the only difficulty about terminating an employee on a permanent contract is the severance cost, but it can nevertheless be done without showing cause (except for discriminatory dismissal) since the entry into force of the “express disciplinary dismissal” in 2002. This type of dismissal is now the most commonly used by companies. Temporary contracts should be used only when justified and not, as it’s now often the case, outside the law (see the numerous judgments of the courts), and these contracts should also have greater financial protection in case of termination.

Argument 2. Failure to properly implement internal flexibility within companies, resulting in the bulk of the adjustments leading to the loss of jobs.

Response. In my view, not only in a legal sense but also in real life, companies have a great level of flexibility to organise their productive activities. It is good practice to let each company adapt to its own circumstances, however this should be done with the participation of employees and their representatives. It is true that in some cases a business decision can only be made if there is an agreement between the employees and the employer, but is this negative for the good management of a business or, on the other hand, makes workers more motivated?

Argument 3. A complex scheme of collective bargaining that limits the scope for adapting working conditions to the needs of employers and workers.

Response. In the current legislation, and even more so since the reform in June 2010, the laws in relation to collective bargaining are fairly extensive, and in fact agreement is only needed to modify a collective bargaining agreement which is higher than the company’s level (for instance, agreements at provincial or estate level). Is this a cause of workplace inflexibility? In fact, I don’t think this is the case in the real workplace.

Argument 4. The high incidence of unemployment in groups needing special support in joining the labour market, such as young people, unskilled long-term unemployed, people with disabilities, and those in situations of social exclusion.

Response. It is important to economically promote, for instance by way of monetary incentives, only the recruitment of groups with difficulties to access the workplace. It is also important to consider, as was done in the June 2010 and August 2001 reform, if the conversion of temporary contracts into permanent contracts should also be promoted.

Argument 5. The difficulties that women face in gaining access to jobs and promotion on an equal footing, leading to a lower rate of female employment.

Response. The participation of women in the Spanish workplace is increasing. However, the lack of provision of services to look after children and other dependants, which are two important aspects in the creation of employment, makes it harder for more women to enter the workplace. It is important to improve on these issues, and not to further reduce the limited services available, because the suppression of these services has a negative impact on women in the workplace.

3. Finally, I would like to express that I substantially agree with most of the proposed reforms set out in a recent report about Spain prepared by the International Institute for Labour Studies titled “Spain: quality jobs for a new economy”.

A) With regard to training and education, the report emphasises the importance of ensuring a responsive and good quality education system, improving access to high-skilled occupations and emphasizing training initiatives in the active labour market policies.

B) In relation to employment, the report notes the importance of reinforcing public employment services, improving activation strategies, improving the targeting of hiring subsidies (for instance, low-skilled or disadvantage jobseekers), and a comprehensive strategy to ensure that no youth is left behind, particularly focusing on improving school retention rates.

C) In relation to the duality/segmentation of the labour market, I agree with the report’s view that it is important to regulate, in a clear way, the reasons behind the termination of an employment contract for economic reasons, and it is also important to strengthen social protection for temporary workers and to reorientate the current incentive structure governing part-time employment, focusing on closing the benefits gaps between full-time and part-time workers. I also agree with the report’s final thesis that “cutting active and passive labour spending for the sake of austerity would only derail the current recovery process and prolong the labour market recession”.

Thank you very much for your attention.