Spain job reform aims to end two-tier system

Draft labour reforms proposed by the Spanish government seek to dismantle a two-tier system which leaves many contract holders with no rights while others are prohibitively expensive to lay off, state-run radio RNE said.

Citing draft proposals seen by RNE, the radio said on Thursday that the reform will expand the use of a permanent contract that offers 33-days severance pay per year worked versus the typical 45 now, one of the highest in the developed world.

The proposal would therefore lower severance pay for workers holding permanent contracts and streamline the legal bureaucracy faced by companies laying off employers while discouraging the wide use of temporary contracts, which offer no job security.

RNE said the draft proposals include adding or raising severance obligations for temporary contracts in an effort to discourage their abuse.

As for firing, one of the most heated topics of the reform debate, RNE said the draft proposals seek to close legal complications in the lay-off process which make the dismissal of employers a prolonged and expensive process.

The reform package would include a plan to increase youth employment, RNE said without giving details, and give employers the flexibility to cut working hours at times of reduced demand.

The government, unions and business leaders have been trying to agree on a consensus reform programme for at least a year.

The discrepancies between permanent and temporary contracts is the key issue in any reform at a time when the unemployment rate in Spain is up to 20 percent, the highest in the eurozone.

More than 90 percent of those laid off in Spain's recession have been holders of temporary contracts which offer little or no rights and which are favoured by employers because the workers are easier to hire and fire in uncertain times.

Expert say both contract types encourage work-place apathy and contribute to one of the lowest productivity levels in Europe.

But the ruling Socialists said this week a new deal must be up and running by the end of this month, spurred at least in part by fears of a debt crisis contagion in the eurozone after Greece's financial woes.

Economists consider labour market reforms, along with bank restructuring and reducing Spain's deficit, essential to solving the country's long-term economic problems.

Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Wednesday a final plan would be go to the cabinet on June 16 with or without a deal with unions and employers.

"The final document is what will be presented at a cabinet meeting on June 16," Maravillas Rojo, head of the Labour Ministry's employment department, told reporters on Thursday.

The government confirmed on Thursday that advances had been made on technical details of the proposals during tripartite talks on Wednesday.

The three parties were not planning to meet again until next week because of a bank holiday in Spain on Thursday.

Labour unions have called a one-day public sector strike on Tuesday against government austerity measures which include a public sector pay cut.