Spain gives go ahead to sweeping labour reforms

SPAIN’S new conservative government has approved sweeping labour reforms as part of a drive to revive a sick economy and solve Europe’s worst unemployment nightmare.

With the jobless rate at nearly 23 per cent, the plan aims to encourage companies to hire more people by cutting severance packages and offering tax breaks for taking on young people.

Spain is eager to restore investor confidence, and satisfy the European Union and other international institutions by seeking major structural reforms in order to cut its deficit.

Under the new package of measures, Spanish companies facing hard times will be able to pull out of collective bargaining agreements and have greater flexibility to adjust an employee’s schedules, workplace tasks and wages, depending on the economy and company.

The country’s severance packages – long seen as among the most generous of any country – will also be cut from 45 days of pay per year worked to 33 days.

A clause will also be introduced that will cut the amount of time companies can have their workers on temporary contracts with few benefits. Nearly a third of the workforce in Spain is on temporary contracts, a huge percentage that makes the country’s jobless rate so volatile. In the future, workers must be moved on to permanent contracts after 24 months, rather than the current three years.

Small companies with 50 workers or fewer will now get corporate tax breaks of €3,000 (£2,513) for each person under 30 hired. Spain’s unemployment rate for people under 25 is almost 48 per cent.

The government has also introduced a measure where if an unemployed person aged under 30 is hired, they will still get 25 per cent of their jobless benefits, with another 50 per cent of the benefits going to the employer.

The government will also make it easier for companies to lay off workers cheaply. A new rule stipulates that a company simply has to show its revenue is down for three straight quarters in order to lay people off, with severance pay of just 20 days per year worked.

In cases of lay-offs in which a company does not argue economic reasons, the maximum amount a person can receive will now go down to 24 months of salary, from 42 under the old law.

The labour reforms are the final part of a three-part push to revive an economy that is expected to slip back into recession this quarter after limping out of an almost two-year slump in 2010. One of the first reforms brought in by the new government was a €15 billion package of deficit- reduction measures.