Spain job reform may include public lay-off fund

Spain's labour market reform, aimed at easing the hiring and firing process, may include a public fund to help struggling companies with severance payments for laid-off workers, the labour minister said.

The proposed salary guarantee fund (Fogasa) would cover eight days of total severance pay if a company was undergoing financial difficulties, the Labour Minister Celestino Corbacho said late on Thursday in a radio interview.

"It's different when a company uses a mechanism because it has no choice, rather than when it wants to ... this cost could include a payment of eight days" Corbacho said.

The minister gave no details of how the fund would be financed.

Formal three-way talks on the proposal's details between the government, the unions and business leaders ended with no agreement on Thursday, but the Socialist government has said it will present its own proposal by June 16 at the latest.

The minority government will need the backing of other political parties to get the legislation passed.

The reform is seen as crucial to prevent Spain's battered economy from stagnating, weighed down by 20 percent unemployed and a massive budget deficit.

Key points in the reform, some of which have been leaked to local media but are still to be confirmed, include reducing the use of temporary contracts, which offer few rights to workers, and boosting youth employment.

More than 40 percent of under-25s available for work in Spain are unemployed.

Prime Minister Jose Luis Rodriguez Zapatero on Friday is expected to present the government's working proposal to political parties, from which it needs parliamentary support, the unions and business leaders before inking its final draft.