Plan to fight unemployment

The government on Friday passed a royal decree overhauling regulations governing the labor market aimed at addressing the problem of surges in unemployment in times of economic downturns and the large number of workers on temporary contracts. The measures go some way toward meeting one of the main demands of employers, which was for a reduction in severance payments.

Here are some of the highlights of measures approved by the Cabinet:

- Severance payments. Compensation for workers on permanent contracts who are unfairly dismissed is reduced from 45 days per year of service up to a maximum of 42 months to 33 days and a maximum of 24 monthly payments. Severance payments for the period up until the new legislation takes effect will be paid at the old rate of 45 days, and at 33 days thereafter.

Layoffs justified by objective causes such as economic reasons normally processed through so-called labor force adjustment plans, or EREs, will carry compensation of 20 days pay for every year worked up to a maximum of one year's salary. Companies will be able to sack workers under this modality when they can demonstrate actual or forecast losses, or have booked three consecutive quarters of falling sales.

- Temporary contracts. Temporary contracts cannot be extended for a period of more than 24 months. The employer thereafter must offer the employee a permanent contract. The previous Socialist government had introduced this limitation but suspended it in a labor reform introduced last year.

The measures also introduce a new form of contract for companies with under 50 employees, under which workers receiving unemployment benefit can continue to receive part of this entitlement alongside wages.

- Hiring incentives. Companies with under 50 workers hiring employees under 30 years old will receive a tax reduction of 3,000 euros per worker. Youth unemployment in Spain currently stands at around 48 percent.

Companies hiring workers aged between 16 and 30 years will receive a discount in the social security contributions they have to make of up to 3,600 euros over three years.

Another measure aimed at reducing unemployment among the young is to extend the age limit in which young people can enter an apprenticeship to 25 years old.

Firms hiring workers over 45 years old who have been in long-term unemployment will be entitled to a discount in social security contributions of up to 4,500 euros per worker over three years.

- Collective bargaining. Agreement reached at the company level will be given priority over those at sector or territorial levels. Companies in difficulty will be freed from the obligation of adhering to sector or territorial agreements. Once a collective agreement expires, labor representatives and employers will be given a maximum of two years to negotiate a new contract. Currently, agreements that have expired remain in place until a new accord is reached. The new rules state that after two years the old agreement will cease to be valid.

- Job placement. Temporary employment agencies with large networks of job placement centers and experience in the market are authorized to help find work for the unemployed.

- Training accounts. Individual accounts will be set up for professional training for employees, who will entitled to 20 hours of training a year paid for by the company.

- Other measures. Men up to the age of 30 and women up to 35 who plan to go freelance can receive their unemployment benefits in a one-off lump sum. The reforms also aim to tackle absenteeism and cases of fraud in which a worker finds employment in the black market while receiving unemployment benefits.