Spanish employment reform : will it create new jobs?

[sunseeker]

just been reading this article by a profesor at a madrid university about the employment reforms that rajoy has introduced and hes made some interesting points.

http://www.farodevigo.es/opinion/2012/02/25/siete-preguntas-reforma-laboral/626990.html

the plans are to crack down on employers that dont give contracts so that more workers are off the paro and back working on contracts so that taxs are being paid, but also to make it easier for employers to get rid of unwanted employees or ones they cant afford by lowering the amount they have to pay out when they lay people off and also letting people be contracted for longer before they have to be made indefinido.

the profesor says that these changes will only work if theres a demand for employees which will only happen if they have the orders to fill and need to employ workers, but at the moment there are less and less people buying so theres a danger of the changes creating more unemployment rather than less.

wuld spain be better taking on the british paye system or will these reforms work? what do you think would halp the emplyment situacion at hte moment in spain... or tenerfe?!

[bonitatime]

Having read 2/3 articles in the paper I am not clear it would encourage me to take on more staff. There is still a big payoff if you have to let staff go. Easier to work with short term contracts and change staff. Which is sad but realistic.

Even the PP have said they expect things to get worse before they get better

[sunseeker]

as a business owner then, what would make life easier?

[LosRoques]

as a business owner then, what would make life easier?

Short answer, yes, and better for many job-seekers too.

Long answer.... well.....

We set up our company and hired our first employees just shy of 7 years ago. There have been some minor reforms in employment law in that time but nothing like what's happening now. Although many won't like it I think what's happening now will prove beneficial to the employment market long-term, making it more open. It will also make it more likely that people will pay taxes.

The biggest and most helpful change is breaking the collective bargaining system. This system has effectively stifled the employment market and is the main contributing factor to the practice of partial contracts for full time employees.

Since day 1 we've given all our employees "jornada completa" contracts, meaning full 40 hour per week contracts. We do this to comply with the law, but it does mean that some of our employees are overpaid for what they do and the hours they work.

Under the collective bargaining system there are minimum wages for every post in every level of business in every industry, and the system even takes into account the size of the business. For example, the minimum wage for a head chef is different to the minimum wage of a commis chef or a waiter. Whilst in many cases the wages are the same across the industry (e.g. waiters) in some cases it goes further; for example the minimum wage of a head chef in a 5 star hotel is different to the minimum wage for a head chef in a small restaurant. Yes, it really is that detailed at times.

If this collective bargaining system is removed then the employment market will stabilise itself in terms of wages; employers will be able to set wages and hours according to the skill and experience of their employees and the level of their business. Why should a 20 seat mom-and-pop cafe be forced to pay the same wages for an inexperienced untrained waiter as a 50 seat fine-dining restaurant pays for a trained experienced career waiter? Doesn't make sense. So what happens? The mom-and-pop cafe doesn't give a contract, or gives a 20 hour contract for a 40 or more hour week, and pays the balance in black (undeclared). They're cornered into breaking the law or running themselves out of business by paying a minimum wage that's too high for the position in question.

We've been criticised in the past for being too demanding in what we want from new hires. Thing is, if I'm paying full-contract minimum wage then I want a waiter who is a career waiter with experience, not someone who lost their job in the construction industry or has come out of school or uni and has hopped from bar-cafe waiter to room cleaner to whatever else just because they need the cash. I would happily hire and train someone like this if they wanted to take the job seriously, but not at current minimum wage for the position as that really is overpaying them. I won't break the law and give them a partial contract to do it either.

The old system has other impacts; there was a lot of noise recently about the recent rise in IRPF. What wasn't mentioned is that people on full contracts at minimum wage actually benefited, as the minimum wage was raised as well. Net effect for someone on a minimum of 900 is about 20-30 more in their pocket. However, for those being paid part contract part black the employers can absorb the difference on the part paid in black and there's really not a lot the employee can do except leave, which in the current market would be foolish. So the employee pays more IRPF but the employer doesn't increase the wages. Employee loses out, so it was only those paying less tax in the first place that made all the noise. In our case as employers the change means our employee bill has gone up and all our employees have a bit more cash.

The system of contracts is also destructive to a fluid employment market. For a start, there really aren't any simple temporary or part-time contracts. If a business needs an employee to cover a few hours here and there the employee must still have a fixed-hour contract. If the employee is on any kind of contract with a business for more than 9 months the contract becomes permanent and the business has all the associated responsibilities that come with it. Consequently, pretty much all part-time cover work like this is off-contract and paid in black. There are no paid-by-the-hour fill-in positions. If our KP goes sick for a couple of days we don't have any choice but to pay someone cash in hand to cover it. Apart from anything else by the time we've done all the contracts with our accountant and SPEE (the relevant government body, used to be INEM) the regular KP is back. What's the point? There's no simple way to pay someone for just a few days.

The fixed contract system also completely stifles market movement of experienced employees. Anyone with a permanent contract will stay in their job simply because they have a permanent contract. Even if the working conditions are poor, they're treated badly or they might get more pay elsewhere they'll stick where they are for the sake of the permanent contract and the "protection" it gives. From the employer's side, they don't want to give permanent contracts as an employee on a permanent contract is costly hard to get rid off, short of gross misconduct. But for those permanent employees they do have the know they have this lever of the permanent contract and can use this to retain an employee in less than market pay and conditions because the employee won't take the risk of leaving. So employees won't move for anything less than a permanent contract and employers won't give them, bringing the market for experienced staff to a halt. It's a double-edged sword for both employer and employee.

We see the effect of this on so many CVs. You look at a CV and the employee has changed jobs every 9 months, with maybe one 2-3 year post in a 10 year period. This is simply because the employers hire for 9 months and at the end of the period let someone go just so they don't have to take on the load of a permanent contract. In 7 years of hiring here I have never, not once, seen a CV that had a current position of longer than 9 months on it, although we have had employees out of work where their last position was for more than 9 months, but the business closed or made people redundant. Is this really such a good thing as the anti-reformers claim?

Think about the knock-on effects; is a bank going to give a mortgage to someone who doesn't have a permanent contract? Can they get finance for a car? Or for anything? Can they afford private medical care for their family if they don't know they can continue to pay it in 9 months time? Can they really plan any kind of long-term future for themselves if all they see is an endless series of 9 month contracts with no guarantee of continuity in employment, or the alternative of taking less money on black for more hours and harsher conditions?

Strange arrangements get struck up as well; I have a good friend (Spanish) working as a waitress in a hotel in the south. She has a 9 month contract that is for less than 40 hours a week (though she often works more). She gets less than minimum and has to take a break once a year so that the contract doesn't automatically become permanent. This has been going on for 3 years or so. She accepts this deal because the employer has verbally told her they're happy with her and want to keep her but won't give her a permanent contract. She won't take the risk of going elsewhere and losing this arrangement. You can't tell me this is really a good situation, surely?

When we first started the business, we were advised by our accountants and lawyers to give part temporary contracts and pay the rest in black. Yes, we were advised by our accountants and lawyers to do this. This is normal practice across many industries, most especially hospitality. We didn't do this, it just seemed so alien to us, we abided by the law.

However, most small businesses, especially in hospitality, are paying a maximum of 50-75% of what they should in terms of tax and social security, and in many cases very much less. This isn't just because they're greedy, in many cases they wouldn't survive if they paid in full; it took us far longer (measured in years) to move into profit than would be normal mainly due to staff costs. But then whilst we are a business and like any we need to make a profit we're not really in it for the money, if we were we'd be back doing what we did before (IT).

Some business do take serious advantage of their employees in these circumstances; they'll give a 9 month 20 hour a week contract and expect the employee to work 80-100 hours a week up to 6 or even 7 days a week at times, or risk losing their job to someone willing to do it. And with the market the way it is there are plenty of people out there who are willing to do it. They may get more money than someone working 40 hours a week on a full contract, but not nearly the same pro-rata.

With the collective bargaining system gone, simpler part-time employment contracts and less restrictive permanent contracts the market will become more fluid and wage levels more realistic (be it up or down). I'm still in favour of some form of minimum wage, though. The anti-reformers say it will be bad for employees; the only employees likely to be affected are those over-paid and clinging to their permanent contracts because they know they could never get the same money elsewhere as the market has changed. For the majority, i.e. those living from 9 month contract to 9 month contract with no stability for themselves or their family it will be a blessing.

Added after 12 minutes:

To answer the question "will it create more jobs", yes, in the long term.

Spain's biggest product was construction and that's now gone. The government let everything else slip away because the economy was being driven by this one industry.

Big global corporations, even Spanish based ones like Telefonica or the Spanish banks, have been moving non-location based roles out of Spain to countries with less restrictive employment practices, effectively cutting jobs in Spain year after year.

Conversely there's been no inward investment; nobody wants to start a business or employ people in Spain because of the cost of employment and the draconian employment law.

If collective bargaining is removed, the current contract system reformed and real part-time hourly options introduced then the market will bubble for a bit, stabilise, and industry might start considering Spain as a location to invest. But it's certainly not going to happen overnight.

[tonypub]

brilliant post losroq,you fancy being the new boss of spain?youd get my vote

[sunseeker]

brilliant post losroq,you fancy being the new boss of spain?youd get my vote

me to. one word. wow. :wow: trying to think how to reply to that. have to agree with pretty much all of it!

ps. saw your restraunt on c4 las week :D

[LosRoques]

me to. one word. wow. :wow: trying to think how to reply to that. have to agree with pretty much all of it!

ps. saw your restraunt on c4 las week :D

Let me guess, "A Place in the Sun" repeat....?

[sunseeker]

yep. :)....

[bonitatime]

Where did you see the part time contracts will be reformed? As this is very interesting.

[sunseeker]

wasnt there a bit in the papers a few weeks ago about everyone, even personal cleaners, were supposed to have contracts now? maybe that is the reforms.

[LosRoques]

Where did you see the part time contracts will be reformed? As this is very interesting.

Truthfully I can't remember, but as I understand it the existing part-time contract model is being modified to effectively permit overtime, allowing hours to be flexible. This means if you've got someone that you want to employ on variable hours, you can. I'm not sure if this can be 0 hours or not. There's also the possibility of more change coming.


wasnt there a bit in the papers a few weeks ago about everyone, even personal cleaners, were supposed to have contracts now? maybe that is the reforms.

Everyone being employed by a company should have a contract, whether it's part time, full time or whatever. Taxation aside without a contract you're not insured for accidents in the workplace - the system is different here than in the UK which a lot of people don't realise. Part of your social security cover goes towards medical insurance for work-related accidents or illnesses. When that happens you head to the relevant "mutua" clinic and not the government health clinic. If you don't have a contract, you're not covered.

Personal cleaners etc. that may work for a number of individuals I think is a different case. Effectively they're self employed and should be "autonomo" and declare their income themselves. If any contract exists it's probably the worker that has to produce it, as they're the self-employed one - they effectively are the business. But I can't speak to that with certainty.

[kingbaker]

YES L.R I was just about to say that myself...you beat me to it!!!:whistle:

[sunseeker]

Everyone being employed by a company should have a contract, whether it's part time, full time or whatever. Taxation aside without a contract you're not insured for accidents in the workplace - the system is different here than in the UK which a lot of people don't realise. Part of your social security cover goes towards medical insurance for work-related accidents or illnesses. When that happens you head to the relevant "mutua" clinic and not the government health clinic. If you don't have a contract, you're not covered.

Personal cleaners etc. that may work for a number of individuals I think is a different case. Effectively they're self employed and should be "autonomo" and declare their income themselves. If any contract exists it's probably the worker that has to produce it, as they're the self-employed one - they effectively are the business. But I can't speak to that with certainty.

no. it was this article that i ment. http://www.publico.es/dinero/384195/las-empleadas-del-hogar-tendran-igualdad-de-derechos-laborales-en-2019

it says that anyone employing a cleaner has to give them a contract. not that the cleaner has to be autnomo.

[Faraway]

brilliant post losroq,you fancy being the new boss of spain?youd get my vote

Me too - fantastic post!

[bonitatime]

Thanks Los Roques I will keep a look out as the present part time law is so inflexible as to be unworkable

[sunseeker]

if you get any information can you post it. im interested in this stuff to

[LosRoques]

no. it was this article that i ment. http://www.publico.es/dinero/384195/las-empleadas-del-hogar-tendran-igualdad-de-derechos-laborales-en-2019

it says that anyone employing a cleaner has to give them a contract. not that the cleaner has to be autnomo.

Interesting article. It was from June last year, and therefore relates to what the previous government was trying to do. Basically they were trying to push domestic help into the existing contract system, which is nuts for people with multiple clients.

The article seems to suggest this is aimed more at households that have permanent staff, it even talks about households with more than one staff member. However, it also talks about 700,000 workers in a country with a population some 46m and some 17m households. If you assume each worker visits a house on average 2 days a week (meaning that on average they can do 2.5 houses a week) that's around 10% of households have a cleaner of some kind. Does that sound about right? If so, that would cover all cleaning staff, even the girl that comes in 3 hours on a Friday afternoon to straighten your flat for you before the weekend. Truthfully I have no sense of how many people in Spain have cleaning staff. I can think of only 1 person on the island I know that does (Spanish friend).

I can see that using contracts for what are effectively permanent staff makes sense. But it's crazy in the case of a cleaner who, say, has 5-6 clients. That would mean 5-6 employment contracts for one person.

It'll be interesting to see if the current government pushes for this. Although it makes sense for domestic staff in permanent employ in a single household it doesn't make sense for the individual servicing several households - they're effectively a mini one-person cleaning agency.

In the former case the employer should absolutely be making IRPF and social security payments on behalf of the employee. In the latter case the worker should go autonomo; if they have 5-6 contracts they're going to lose a lot of work and money as you can guarantee the people they're working for aren't suddenly going to pay more to cover the employer social security contributions which are about 30% of salary...