How Will Labor Reform Affect Me? [Spain]

How Will Labor Reform Affect Me? [Spain]
Changes in labor regulations will not only impact new contracts. The rules of the game for all those who are being laid off will change.
El País: ¿Cómo me afecta la reforma laboral?
Staff Report February 10, 2012

The labor reform which will go into effect tomorrow, when Mariano Rajoy’s government approves it by degree and it is published by the Official State Bulletin (BOE), will not only affect those who receive new contracts. The rules will be different for all workers, to some degree or another, from the norms established by the José Luis Rodríguez Zapatero’s government’s previous reform. The Ministry of Labor offered the first clues about the rule changes at a post-cabinet meeting press conference attended by Vice President Soraya Sáenz de Santamaría and Minister of Labor and Social Security Fátima Báñez.

Does the 33-day contract affect me?
A worker taking a new job will sign a contract guaranteeing a maximum layoff compensation (if dismissal was unfair, for example) of 33 days’ pay for each year worked for the employer, topping out at 24 months’ pay. Before, the maximum compensation was 45 days’ compensation per year worked and the upper limit was 42 months’ pay. That is to say, if you started working at a company tomorrow and continued for 10 years with an annual salary of €20,000, your maximum compensation upon dismissal would be approximately €1808 (corresponding to 33 days’ work) multiplied by 10, the number of years you worked. Your total compensation would be €18,080, compared to the €24,650 you would have been entitled to for a 45-day indemnity rate.

Workers that already have a contract will not escape this reform. If your previous contract entitled you to a maximum compensation of 45 days’ pay for each year of work, this will still be your compensation, but only for the amount of time you worked until yesterday. From here on out, you will accumulate a potential 33 days of compensation for each year you work. That is to say, if you worked 10 years for your company until now, and it inappropriately dismissed you next year (giving you 11 years of service), your compensation would be paid out at two different rates: you’d receive the 45-day rate for the 10 years you worked before the reform and the 33-day rate for the 1 year you worked after it.

Will it be easier for a company to dismiss me?
Companies that want to employ the Labor Force Adjustment Plan (ERE – the process for laying off workers) and who can avail themselves of the minimum compensation for laid-off workers (20 days’ pay for each year of work with a maximum of one year’s pay) will not need the approval of the Labor Authority. Until now, the majority of companies that wanted to use the ERE negotiated compensation with the Business Committee, but now the labor authority will not oppose them as long as there are no legal irregularities. To achieve such consent before, the compensation usually needed to be higher. Now, however, the business can solicit the ERE alleging one of the established conditions for it. If there is conflict with the workers, only a judge can stop this action.

The reasons a company can cite for applying the ERE will increase. As such, there will be more cases of businesses paying the prevailing severance fee, which is the minimum (now 20 days’ pay for each year worked and 12 months maximum). According to the Labor Ministry’s explanation, businesses will be able to make mass layoffs even if they are not already losing money. They can now side “current or foreseeable losses” or “a decrease in sales for three consecutive months”.

What kind of severance payment can I apply for now?
It depends on whether your dismissal is considered appropriate or inappropriate. If it is appropriate (the business can cite economic and organizational causes and so forth) you will receive 20 days’ pay for each year worked with a maximum of 12 months’ pay.

If the dismissal is considered inappropriate, or an agreement is reached with the company, one could receive 45 days’ pay for each year worked until today (a maximum of 42 months) for days worked until today, and 33 days’ pay for each year of labor worked afterward with a maximum of 24 months’ pay.

Can I make a series of temporary contracts with a company?
For 24 months at most. From December 31, it will again be prohibited to keep a worker for more than two years on temporary contracts alone.

What advantages will the young have when they receive contracts?
The reform was made with the goal of encouraging small and middle businesses to employ more young people. For this reason, they can keep younger employees on a trial basis for a year. In addition, the company will have the right to deduct €3000 from its taxes when it signs its first worker, as long as he is younger than 30. This also applies to a new business that signs its first worker.

Businesses of any size that sign people less than 30 years old will also receive discounts on Social Security quotas: €1000 for the worker’s first year, €1100 for the second, and €1200 for the third.

Are there ways to help the unemployed who are over 45 years old?
There are discounts in Social Security quotas for businesses hiring those who were unemployed for the long term. The business will be able to save €1300 per year for the first three years after making a contract with a new worker.

What would the business have to do to reduce my working week?
Businesses will be able to carry out the EFE, which also deals with a reduction in working hours, without going to the Labor Authority as they had to until now. Besides negotiating everything on a higher level, the business and the workers’ representatives will be able to reach consensuses on their own agreements which are adapted to their own circumstances.

If I am unemployed with benefits, to whom is my obligation?
The new norm supposes that unemployed who are on the Inem list and who are meeting their obligations can “produce service of general interest which benefits the community through the conventions of the Public Administrations.” Thanks to this legal opening, the mayor of Madrid, Ana Botella, can now assign the unemployed to work in libraries or other public services. Botella had been requesting volunteers for this work. The government is attempting to control unjustified falls out of employment and seasonal incapacities through mutual work agreements.

Do I have the right to vocational training?
All workers will have the right to 20 hours of annual training paid for by their businesses. Formation and apprenticeship contracts can be given to workers up to age 30 from now until the unemployment rate decreases to 15%.

Do women have advantages built into their contracts?
Businesses in traditionally masculine labor sectors will receive some bonuses for hiring women. If the woman is under 30, an additional €100 deduction can be made from payments to the Social Security fund for youth on her behalf (hence the deduction would be €1100 for her first year of work). If the woman is over 45, the €1300 exemption for hiring a long-term unemployed person would increase to €1500.

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