Social Pacts in Portugal: Agreement on Modernization of Social Protection

Period: 2001

Negotiating Parties:  Government, the General Workers’ Union (UGT), The Confederation of Portuguese Farmers (CAP), the Confederation of Portuguese Trade and Services (CCP)

Goals of the pact:  To Improve social protection and to enhance the system’s sustainability

Matters agreed:

• Modernization of the social security system
  • Reform and diversification of financial resources
  • Commission a study on social security reform and to adopt measures recommended in this study in 2003
  • Improve transparency of the taxation system 
  • Use of social dialogue in
    • Altering tax rates
    • Development of capitalisation financing instruments/systems of social security
  • Improvement of management in social security systems
  • Combating fraud and evasion
• Participation by social partners
  • The government committed itself to promote social partners’participation at different levels on social security issues
  • The social partners’committed themselves to play an active role in the planning and management of social security systems
  • Creation of the Consultant Council of the Institute of Solidarity and Social Security (ISSS)
• Reformulation of the pension calculation formula

Institutions involved: Standing Committee for Social Dialogue (CPCS), National Council of Solidarity and Social Security (CNSSS)

Background: The reform of the social security law in 2000 had been the important subject for debate among social partners and the government in the CPCS.  The three parties recognised problems with the public social security system.  The system was considered to be not financially sustainable and not reflecting individual contributions.  This pact aimed at facilitating structural changes to the social security system.

Comments:  This agreement was signed by the government and workers organisations only. However, the accord resulted in significant changes in the national social protection system. 

Despite its involvement in the negotiations, the Confederation of Portuguese Industry (CIP) was not signatory party of this pact.  This is because the CIP’s demand of a 1% reduction in employers’ social security contributions was denied by the other social partners because it was seen to undermine the future sustainability of the system.  The CGTP did not sign on the annex on contributions to private schemes.

The most controversial areas were first, the provisions dealing with changes in the calculation formula for pensions for ensuring solvency and second, a provision that allowed employees to invest their pension contributions above a certain ceiling in private schemes.  Consequently, the latter issue ended up being included as an annex.

Full text of the agreement: Available for purchase at http://www.ces.pt/html/e_main.htm