Spain's govt approves labour reforms

11 Feb 2012, 11:09 am   -   Source: AAP
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Spain's government has passed labour market reforms deemed crucial to creating jobs to chip away at Europe's worst unemployment figures.

Spain's new conservative government has approved sweeping labour market reforms as part of a drive to revive a sick economy and solve Europe's worst unemployment nightmare - a jobless rate of nearly 23 per cent.

The plan is designed to encourage companies to hire more people by cutting government-mandated severance packages and offering tax breaks for taking on young people.

But the fast-track approval of the measures generated violent clashes between riot police and protesters who say they will be stripped of cherished worker benefits.

More than 500 held a peaceful rally in Madrid's central Puerta de Sol plaza late Friday but it turned violent after some tried to march toward parliament and were blocked by police.

Scuffles broke out, with officers using batons on demonstrators. At least eight protesters were detained and several officers sustained minor injuries, Spanish media reported.

Before the mayhem, protester Cristina Fernandez waved a placard saying "Every cut mutilates my rights" and said the labour reforms won't achieve the government's goals.

"To reduce unemployment, you need to create jobs, not simplify firing," said Fernandez, a 52-year-old business consultant.

Spain is eager to restore investor confidence, satisfy the European Union and other international institutions by seeking major structural reforms in order to cut its deficit and ward off fears that it could follow Greece, Ireland and Portugal in seeking a bailout.

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 how the economy and the company are doing.

The country's severance packages - long seen as among the most generous of many countries - will also be cut from 45 days of severance 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.

As of January 1 2013, workers must be moved on to permanent contracts after 24 months. Following Socialist reform of 2010 companies could run temporary contracts indefinitely.

Small companies with 50 workers or fewer who hire people receiving jobless benefits will get 50 per cent of that person's unemployment benefit while the employee will continue to receive 25 per cent of the payments along with their wage. This way the person gets a job and the government saves on a quarter of the dole payments.

Meanwhile, self-employed people wishing to set up a business will receive tax breaks of 3,000 euros ($A3,700) for the first person they hire if that person is under 30.

Spain's unemployment rate for people under 25 is almost a staggering 48 per cent.

The government said it will also oblige unemployed people to carry out social work or take part in job training programs, a measure officials say will help cut back on Spain's huge underground economy.

The government will also make it easier for companies to lay off workers cheaply when times get rough. 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 layoffs in which a company does not argue economic reasons, the maximum amount a person can receive will now go down to a maximum of 24 months of salary, from 42 under the old law.

And once the new package is passed, workers who currently have severance arrangements of 45 days per year worked will see that reduced to 33 days.

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 nearly two-year slump in 2010.

The first two reforms taken by the new government were a 15 billion euro - ($A18.55 billion) package of deficit-reduction measures and a plan to force banks to set aside 50 billion euros more in provisions to cover their exposure to a real estate market that tanked three years ago.

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