Labor reform according to Royal Decree-Law 5 / 2006, of 9 of June, for the improvement of growth and employment, published in the BOE No. 141, 14 of June.

15 last June came into effect some of the measures provided for in labor reform agreed between the Government, employers and unions last May 4, namely the limit abusive chain of temporary contracts and improving the performance of the Wage Guarantee Fund. On the other hand, the day 1 July 2006 the core of measures involving the aforementioned reform, which was established with the aim of promoting stable employment and quality, reducing the rate of existing temporary, to promote flexibility entered into force companies to participate in an increasingly competitive and improving unemployment protection and performance market Wage Guarantee Fund.

These core measures include the extraordinary plan conversion of temporary contracts into permanent contracts, the new incentive system to permanent employment and reducing corporate contributions.

To start a resounding limit on successive temporary contracts, which means that any worker who, having signed two or more temporary contracts with the same company, accumulate a period of service in the same top job at 24 months is established within a period of 30 months, continue to be regarded as a worker with a permanent contract. According to the records of the Social Security, there are currently the order of about 300.000 workers affected by the abusive concatenation of temporary contracts.

Moreover, the battery of measures against temporality includes the phasing out of subsidies to the conversion of temporary contracts into permanent, so that temporary contracts signed before 1 June 2006 receive the corresponding bonus (800 € per year during 3 years) if they become permanent before next January 1. These grants shall also apply to the conversion of training contracts, relief and replacement retirement.

In the same order, temporary contracts signed until 31 December 2007 may become less permanent contracts of promoting stable employment involving severance pay (33 days per year of service with a maximum of 24 monthly payments) than an ordinary permanent contract (45 days per year of service with a maximum of 42 monthly payments) .Up to date, were only convertible in this way the temporary contracts signed before 31 2003 December.

As for the hiring of permanent employees start, from 1 July 2006 employer contributions for unemployment down 0,25 points, cuts that will increase from 1 July 2008 in another 0,25, so that finally the downgrade total quotas unemployment will 0,50 points.

Among other developments, the incentive plan for permanent contracts among target groups include young men between 16 and 30 years 4 with aids year against the current 2 years. As aid amounts applicable range between € 500 and 3.200, depending on the group to which the worker belongs to the indefinite contract in question is signed. To date stimuli cited supposed percentages of reductions in employer contributions that are now being replaced by fixed amounts, in order that reduced labor cost is relatively higher in the case of workers with lower wages, which are also the collective unemployment rates and higher than average temporality.

Finally with the labor reform, and with regard to chapter reducing business costs for contributions to the Wage Guarantee Fund, fees to be paid by companies descend from 0,4% today to 0,2%. Also they descend from 7,7% today to 6,7% employer contributions for unemployment for temporary full-time contracts entered into by the ETT's, eliminating the surcharge on the price to the existing date and being thus on an equal footing with the rest temporary contracts.


Silvia de Quintana Sáez

DiG Lawyers