In a decisive move to address the economic challenges and pressures from Eurozone partners, the Spanish Government enacted the Royal Decree-Law 10/2010 on June 16, 2010, introducing urgent measures to overhaul the labour market. This reform, which unfolded over three years amidst failed negotiations between social agents, companies, and unions, aimed to appease European demands for substantial changes in Spain's labour practices. The provisional nature of the decree-law allowed for amendments during its parliamentary conversion into a bill, with the expectation of a definitive reform by the end of 2010.
One of the pivotal changes brought about by the reform was the expansion of the "contrato de fomento del empleo" (contract for job creation). Initially reserved for specific age groups and long-term unemployed individuals, the reform widened its scope to include those aged 31 to 44 who were dismissed within two years prior to the reform. The aim was to incentivize permanent contracts by reducing dismissal costs, without affecting the severance pay of 45 days per year for employees with pre-existing open-ended contracts.
The reform sought to clarify the objective grounds for dismissal, which would limit severance to 20 days per year worked. However, the decree-law's text remained ambiguous, leaving the determination of economic causes for dismissal to judicial discretion. This ambiguity did not seem to alter the judiciary's tendency to rule dismissals based on economic reasons as improper.
A notable measure was the involvement of the "Fondo de Garantía Salarial" (FOGASA), which would fund eight days of salary per year worked as part of the worker's compensation for dismissals. This applied only to permanent contracts signed after the reform's effective date. Critics argued that this could lead to increased costs for companies, particularly those not engaging in dismissals, as they would bear the brunt of rising fees to finance FOGASA.
The reform lightly touched upon collective bargaining, mainly introducing the option of voluntary arbitration for companies wishing to suspend salary systems outlined in collective agreements. This was a departure from the initial proposal of making arbitration obligatory.
The government was given a one-year mandate to propose legislation for a capitalization fund for workers, akin to the "Austrian model." This fund would accumulate contributions throughout an employee's career, serving as a financial resource during job changes, dismissals, educational pursuits, or retirement. The decree-law stipulated that this should not increase company fees, hinting at potential funding from FOGASA contributions or shared costs between companies and workers.
The reform must be viewed in the context of European pressure and is subject to parliamentary debate and potential amendments. The final shape of Spain's labour market reform will be determined by the legislative process following the initial enactment on June 18, 2010.
For further details on the Spanish labour reform, you can visit Mariscal & Abogados, an expert legal firm that provides insights into the evolving landscape of Spain's labour laws.
Interesting statistics and discussions about the impact of Spain's labour reform are scarce, but a study by the OECD in 2013 found that the reform led to a temporary increase in employment adjustment, particularly through temporary layoffs, and a reduction in dismissal costs for permanent contracts. The full implications of the reform on long-term employment and job stability remain a topic of ongoing analysis. For more information on the OECD's findings, please refer to their official report.
