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Behind the News -- Europe: Spain After the ReformsCWS 30 August 2.16

CWS 30

Despite long-term wrangling, the Spanish Parliament voted late June in favor of labor market reforms proposed by the Socialist government of Prime Minister Jose Luis Rodriguez Zapatero and supported via royal decree by HM King Juan Carlos.

As a result of this legislation, temporary employment agencies will be allowed to work in the construction industry and public administration sectors. The agencies will now have the right to find jobs for Spain's unemployed, an area which was previously the exclusive territory of the government's job centers.

James Daniel, International Monetary Fund mission chief for Spain, reflected in an interview in the IMF Survey Magazine recently that the measures were a step in the right direction. "Spain's Achilles' heel is in many ways its labor market. If the country is to successfully adjust its economy and make the best use of its resources, the labor market has to work. And Spain's labor market really stands out in Europe as not providing the right service to its country," he says.

Both the IMF and the European Central Bank regard the reforms of the labor market as vital for the revival of the Spanish economy and the avoidance of Spain's further downgrading by international rating agencies.

Spain has an unemployment rate of about 20 percent. About a third of those who are employed are in temporary contracts, and close to half of all Spanish youth are unable to find any jobs at all. Though the labor market reforms are positive for staffing companies, the change does come with some restrictions and changes in rules.

To begin with, temporary employment contracts will be limited to a period of three years but can be extended by one further year subject to collective negotiation. Previously, there was no limit on the length of temporary employment contracts. In addition, beginning in 2012, dismissal payments for temps will be extended gradually from the current 8 days per year worked to 12 days. Further, dismissal payments for employees will be reduced from 45 days per year that one has worked with an employer to 33 days. Proponents hope this move will encourage employers to hire more traditional employees.

Adecco, the world's largest staffing firm, had expressed issues with the reforms. The president of its Spanish division, Enrique Sanchez, felt that the reforms "were too little too late." Though he was pleased that temporary employment agencies could work in the public sector, the general sentiment was that more needs to be done.

"Temporary employment needs to be properly managed. Penalizing temporary employment is the completely wrong thing to do. The only type of temporary employment that needs to be penalized is fraudulent temporary employment for permanent jobs," he says.


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