Social Pacts in Spain: Interconfederal Agreement for Stability in Employment  (Acuerdo Interconfederal para la Estabilidad del Empleo-AIEE)

PERIOD : April, 1997-May 2001

SIGNATORY PARTIES: Employers organisations (CEOE and its small and medium enterprise affiliate, CEPYME) and workers’ organisations (CC.OO. and UGT)

GOALS OF THE PACT: Boost job security and employment creation

BACKGROUND: Widespread job insecurity

• Unemployment has risen from 5,3% in 1977 to a current rate (1997) of almost 22%
• Youth unemployment is even higher, with an estimated 42% of young people under 25 currently (1997) out of work
• Vast majority (96%) of new contracts signed in 1996 are temporary. Of those contracts signed for a fixed-term, some 70% were for a duration of less than three months with only 0,4% for a duration of more than one year
• High incidence of fixed-term contracts due to the high cost of dismissals. Severance payments in the case of unlawful dismissal on objective grounds (despido objetivo) are 45 days pay per year of service, up to a maximum of 42 months’ pay. Employers generally prefer to pay this amount rather than the lower payments on offer for lawful dismissal, in order to avoid being taken to an industrial tribunal, which is time-consuming and costly. This means that, in practice, severance payments in the case of open-ended contracts are expensive and employers prefer to hire employees on fixed-term or temporary contracts, thus avoiding becoming liable for these severance payments. 
• According to employers and trade unions, this system is hampering job-creation, as companies are reluctant to take on employees which are difficult and costly to dismiss
• Nevertheless, trade unions are nervous about making it easier for employers to dismiss workers

MATTERS AGREED:

• Creation of a new type of open-ended employment contract specifically aimed at groups of workers who are finding it difficult to gain a foothold in the labour market (young unemployed people aged 18 to 29; people who have been unemployed on a long-term basis defined as one year or more; unemployed workers aged 45 years and over; people with disabilities and people on temporary contracts).
• Severance payments for these new open-ended contracts unlawful dismissal payments in the case of dismissal for objective reasons were set at 33 days’ pay per year of service, up to a ceiling of 24 months’pay.
• It is hoped that this will contribute significantly to the creation of new, full-time, open-ended contracts.
• They clarified what is meant by “objective dismissal”
• Severance payments in the case of unlawful dismissal for those already employed on open-ended contracts will remain at 45 days’ pay per year of service, up to a maximum of 42 months’pay
• To improve young people’s access to the labour market, the agreement includes provisions, which guarantee training for young people. A new training contract is to be created partially replacing the existing apprenticeship system
• Limit the incidence of temporary working: Two types of temporary contracts, a contract for works or services and temporary contracts in order to respond to production needs are to be defined more narrowly and their use more carefully monitored
• Improved protection for part-time workers
• Establishment of mechanisms to oversee these changes and to measure developments

IMPACT:

• The government claims that since 1997 these new contracts have had a positive effect on both rate of unemployment and the incidence of open-ended employment. It cites official figures showing that the number of open-ended contracts increased from just under 162,500 in 1997 to almost 220,800 in 2000. The incidence of fixed-term contracts has thus been reduced, from 35% of all new contracts in 1997 to 32,7% in 1999 and around 32% in 2000. Unemployment has also fallen, to 13,7% in January 2001 from 17,2% in January 1999, although Spain retains one of the highest unemployment rates in the EU
• The incidence of this type of work (temporary and fixed-term employment) remains well above the European average, a situation that the government wished to rectify in 2000.  A series of social dialogue talks were engaged on this subject and general labour market reform. In the beginning of 2001 it became clear that an accord looked to be out of reach and no consensus was reached. Therefore, the government approved a package of labour market measures that concentrate on widening the categories of people eligible to be employed on the 1997 open-ended contracts to which reduced severance payments apply, introducing an end-of-contract bonus of eight days’per year of service in the case of temporary contracts and increasing flexibility in part-time work.

FOLLOW-UP AND MONITORING SYSTEMS:

• Parties to the agreement have decided to set up a tripartite commission made up of representatives of the government, unions and employers to monitor the application of the pact and the temporary employment sector
• This commission will also examine statistical information relating to the temporary employment sector and endeavour to improve the functioning of temporary employment agencies

BIBLIOGRAPHY:

Miguel Martinez Lucio: “Spain in the 1990s: Strategic Concertation” in S. Berger and H. Compston (ed.): Policy Concertation and Social Partnership in Western Europe (New York and Oxford, Bergham Books) pp.265-277

Sofía A. Perez: “Social Pacts in Spain” in G. Fajertag and P. Rochet (ed.): Social pacts in Europe: New Dynamics, (ETUI, OSE) pp. 343-363

“Social partners agree further labour market reform” in European Industrial Relations Review, May 1997, No 280

“New Labour market reform” in European Industrial Relations Review, April 2001, No 327

FULL TEXT OF THE AGREEMENT:

http://www.ccoo.es/Publicaciones/DocSindicales/aiee.html