The European Commission Mutual Learning Programme. DG Employment, Social Affairs and Inclusion

Transcription

1 The European Commission Mutual Learning Programme DG Employment, Social Affairs and Inclusion Learning exchange between Slovenia, Austria, The Netherlands and Spain on Tackling Labour Market Segmentation by Reducing Employment Protection Legislation and Addressing Atypical Forms of Work Ljubljana (Slovenia), 11 November

2 This publication is commissioned by the European Community Programme for Employment and Social Solidarity ( ). This programme is implemented by the European Commission. It was established to financially support the implementation of the objectives of the European Union in the employment, social affairs and equal opportunities area, and thereby contribute to the achievement of the EU2020 goals in these fields. The seven-year programme targets all stakeholders who can help shape the development of appropriate and effective employment and social legislation and policies, across the EU-27, EFTA-EEA and EU candidate and pre-candidate countries. For more information see: For more information on the Mutual Learning programme, please refer to: European Commission: Unit C1 European Employment Strategy and Governance, DG Employment, Social Affairs and Inclusion Author: MLP Team The information contained in this publication does not necessarily reflect the position or opinion of the European Commission November

3 Table of Contents 1. Introduction Host country context Themes addressed by the Learning Exchange Learning points

4 1. Introduction A Learning Exchange took place on 11 November 2014 in Ljubljana, Slovenia, to explore the effects of recent reforms addressing labour market segmentation in Slovenia and Spain, as well as alternative forms of employment and their impact on the labour market. It was hosted by the Ministry of Labour, Family, Social Affairs and Equal Opportunities of the Republic of Slovenia. The aim was to foster a discussion on the effectiveness of strategies in Slovenia and Spain to tackle labour market segmentation in the context of the Europe 2020 Strategy and to understand the reasons for the growing use of alternative forms of employment (student employment, bogus self-employment) based on the situation in Austria and Slovenia. The role of national Labour Inspectorates in monitoring and tackling unlawful forms of employment was also discussed. The Learning Exchange brought together representatives of the Slovenian Ministry, the Slovenian Labour Inspectorate, the Slovenian Institute for Economic Research, as well as representatives from: The Ministry of Employment and Social Security of Spain; The Austrian Federal Ministry of Labour, Social Affairs and Consumer Protection; The Austrian Chamber of Labour; and The Bureau for Economic Policy Analysis, The Netherlands. The event included presentations from Slovenia, Spain and Austria, covering the following points for discussion: Tackling labour market segmentation and increasing labour market flexibility by reducing Employment Protection Legislation (EPL); A review of the effectiveness of key measures for increasing labour market flexibility to address duality on the labour market in Spain; Measures to tackle false self-employment; and Challenges arising from the increased use of atypical forms of work. A separate parallel session on simulation models discussed A Behavioural Microsimulation Model for the Analysis of Tax-Benefit Reforms in the Netherlands, as presented by a representative of The Bureau for Economic Policy Analysis, The Netherlands. 2. Host country context The context in Slovenia was set out in two presentations: firstly, by Peter Pogačar of the Slovenian Ministry of Labour, Family, Social Affairs and Equal Opportunities, who gave an overview of the reform for Tackling labour market segmentation and increasing labour market flexibility by reducing EPL; and secondly by Katja Rihar Bajuk, also of the Slovenian Ministry of Labour, on Challenges arising from the increased use of atypical forms of work. Prior to the reform of 2013, labour market segmentation in Slovenia was mainly due to the high level of employment protection for workers on open-ended contracts and the high flexibility and low costs of fixed-term contracts. The proportion of workers on a fixed-term contract in 2011 in Slovenia was 18.2%, compared to an EU average of 14%. In 2012, Slovenia received a Country Specific Recommendation (CSR) from the European Commission, to adjust employment protection legislation as regards November

5 permanent contracts in order to reduce labour market segmentation, in consultation with social partners and in accordance with national practices. To introduce its reform, it was necessary for the Government to negotiate with stakeholders with conflicting interests: employers wishing more flexibility and a lowering of social contributions associated with open-ended contracts; and the trade unions wishing, on the whole, to preserve the status quo. A consensus was reached in March 2013 which led to a proposal for the introduction of single open-ended contracts and a series of measures to simplify administrative procedures for dismissal and provide possibilities for flexible forms of work, amongst other things. The aim of the reform was also to support Slovenia s ageing workforce in becoming more responsive to labour market needs. The reform has led to a reduction of labour market segmentation and of the gap in protection between open-ended and fixed-term contracts. A remaining challenge following the implementation of the reform was to address atypical forms of work and the misuse of certain types of employment. Labour market segmentation in Slovenia also arises due to false self-employment, as well as the misuse of student employment. Both these arrangements entail low social security contributions for employers, but also low employment protection for workers. Student employment is also the cheapest form of labour in Slovenia whereby students are in theory employed on temporary contracts to acquire work experience. This has led to a parallel labour market characterised by the clear misuse of the student employee status. 3. Themes addressed by the Learning Exchange The labour market reform introduced in Slovenia in 2013 has a strong focus on the reduction of employment protection relating to permanent employment contracts, through the simplification of procedures for dismissal, and the reduction of severance payments and notice periods. The reform has also introduced a set of ALMP programmes giving workers, including retired persons, the possibility of carrying out alternative forms of work (e.g. part-time, temporary and occasional work) and more options for undertaking training (e.g. training for workers serving a notice period). This was mainly in response to the fact that the ageing of the population in Slovenia is more pronounced than in other EU Member States, with a relatively low proportion of employed individuals in the age group. As part of the reform, a number of other regulatory amendments were made to enhance internal and external flexibility in sector-specific collective agreements. Steps were also taken to make fixed-term contracts a less attractive option for employers. Severance payments for fixed-term contracts were introduced, and social security contributions were raised for fixed-term employment. Lastly, the reform has introduced restrictions on the use of fixed-term contracts for the same type of work. As such, the reform of 2013 in Slovenia has prompted employers to be less reluctant about establishing permanent employment contracts. This means that the labour market in Slovenia is today becoming less segmented, with younger workers benefiting the most from its effects. Following the introduction of the reform, the number of permanent employment contracts has been increasing faster than the number of fixed term contracts. Consequently, the proportion of permanent contracts in all employment contracts has increased. Juan Luis Gimeno and Miguel Fernández from Spain s Ministry of Employment and Social Security presented the key measures and impacts of the Spanish labour market reform. November

6 The aim of the labour market reform introduced in Spain in 2012 was to tackle employment duality by readjusting EPL relating to permanent contracts. The main challenge was to address regulatory rigidities in relation to permanent employment as a way of putting an end to the improper or unfair use of temporary contracts, both in the private and public sector. The reform s key measures include the simplification of procedures for individual and collective dismissals, the reduction of severance payments, and the revision of occupational classifications and working time regulations to provide more options for internal flexibility and adaptability in collective bargaining. Furthermore, the reform now allows firms to opt-out of high-level collective agreements. The reform is also part of a wider effort to promote ALMPs in Spain, such as measures relating to training and retraining, the youth guarantee, and an initiative to support entrepreneurship (i.e. Contrato Apoyo Emprendedores). A set of other measures were also subsequently adopted to accompany the labour market reform, such as the social security flat tax rate for permanent contracts and an Action Plan against the fraudulent use of temporary contracts. Calls for the development of labour market monitoring systems intensified following the implementation of the reform in A first evaluation report was requested for early 2013, i.e. one year after the reform was introduced. A scoreboard of indicators was thus developed to monitor employers responsiveness to the new measures (e.g. job creation, changes in collective bargaining and collective agreements), as well as employment tribunals application of the new rules on dismissals. The expected effects of the reform in Spain were not immediate, although the gap in employment protection that existed previously between permanent and fixed-term workers has closed. More recently, there has been a surge in the number of new permanent contracts in the private sector following the introduction of the flat tax rate in early There has also been a substantial increase in the number of training contracts for young people with no or low qualifications since the reform was implemented (+109.5% between 2011 and 2014). The reform has also led to more dynamic collective bargaining with many more collective agreements signed in 2013 compared to 2011/2012. More specifically, the reform has prompted new collective agreements between firms within certain sectors improving internal flexibility. It also appears that increased collective bargaining has led to wage moderation with an average annual growth of 0.5% since Employment tribunals were shown to apply in practice the new rules clarifying grounds for fair dismissals. The share of fair dismissals was 50.8% in 2013 compared to 21.6% in There has also been change in approach among companies on collective dismissals. Before the reform, negotiations on collective dismissals were about the level of compensation offered for job cuts. Now the fact that the reform allows for more internal flexibility and that companies can justify fair dismissals, negotiations are more about which jobs can be kept and how business activities can be restructured. An overview of the measures to combat false or bogus employment in Austria was presented by Eva Fehringer of the Austrian Federal Ministry of Labour, Social Affairs and Consumer Protection. As there is no clear-cut definition of false self-employment, tackling this phenomenon can prove very challenging. In Austria, there are different legal forms of selfemployment (e.g. new self-employed workers, independent contractors, and free service contract workers). Free service contract workers in Austria are insured under the terms of the General Social Insurance Act, however they are exempted from collective agreements and legislation on working time and wages. Since 2008, selfemployed workers holding a business licence are members of the Austrian Chamber of Labour and receive unemployment insurance as well as compensation in case of November

7 insolvency. This is not the case for new self-employed workers, i.e. liberal professions without a business licence. Whilst the share of self-employed workers was relatively stable between 2000 and 2011 (around 13%), the number of Single Person Companies increased substantially during that period. It is understood that this increase was due to the liberalisation and extension of the trade register in 2003, which resulted in the introduction of professional licences for a high number of specific occupations. The practice of forced dependent self-employment has become widespread in Austria, particularly in certain sectors such as construction and home care services. The liberalisation of the trade register is also contributing to this phenomenon enabling employers to cheaply outsource more tasks to dependent self-employed workers. This has undermined to a certain extent collective bargaining and collective interest representation via trade unions and works councils. Furthermore, such practices imply in many cases the circumvention of labour and social law standards undermining job quality and professional solidarity. While it is understood that false self-employment is widespread today, there are no reliable data to track its progression. There are several options to tackle this phenomenon, such as ensuring effective enforcement of existing laws and extending collective agreements on wages and working conditions to self-employed workers. Katja Rihar Bajuk from the Slovenian Ministry of labour gave a presentation on the situation in Slovenia regarding atypical forms of employment. The labour market reform of 2013 created more flexibility in open-ended employment relationships whilst attempting to tighten employment protection legislation as regards temporary as well as self-employment contracts. However, the latter is proving more difficult to achieve. It has emerged that the misuse of student-type temporary contracts is prevalent in Slovenia given that student employment is the cheapest form of labour. Currently, employers consider student employment to be an attractive option as it entails low social security contributions. This creates a parallel labour market characterised by low employment protection. According to the Slovenian Labour Inspectorate, wage violation is the most frequent unlawful practice in relation to student work. Negotiations are currently taking place on a proposal to better regulate student work as well as self-employment, including civil law contracts. The rationale of the proposal is to reduce differences in employer contributions and social security entitlements between different types of employment contract. Furthermore, laws requiring the systematic registration of new employees with social security authorities were recently introduced to prevent the misuse of certain types of contract. The main challenge in Slovenia in relation to atypical forms of work is to create the conditions for adequate supervision and enforcement of labour laws so as to put an end to the misuse of student-type temporary contracts and self-employment contracts. Effective monitoring of the parallel labour market may however require further resourcing. On the other hand, one of the main causes of labour market segmentation is the different social security costs associated with employment contracts. To reduce employers tendency to misuse certain types of contract, it is therefore important to review existing legislation, the costs associated with different contract types, as well as supervision mechanisms and sanctions. 4. Learning points The key learning points from the event can be summarised as follows: Slovenia and Spain have recently adopted reforms which address Country Specific Recommendations in relation to Labour Market Segmentation. These two sets of reforms have a number of similarities. These include: November

8 - The simplification of procedures for dismissal; - The reduction of severance payments; and - Active labour market measures. Both Slovenia and Spain have sought to create a level playing field on EPL for all employment contracts, and to introduce flexibility measures to encourage employers to hire workers permanently. However, it is worth noting that a job for life mentality still appears to be prevalent in both countries. It was agreed that legislation needs to be better enforced to tackle atypical forms of work by strengthening supervision of the labour market and effective implementation of labour laws. It was also agreed that public authorities need to understand why false self-employment and atypical forms of work have progressed so much in recent years, or the reasons which encourage employers to resort to such alternatives (e.g. lower labour costs and more flexibility from the circumvention of labour and social law). Again, data collection was identified as the main challenge in this respect; it is understood that the degree of undeclared work and false self-employment is presumably underestimated. In Spain, the data available suggest that this phenomenon may not be as prevalent as in other countries, but more evidence is needed. Another challenge is technological change as a driver of self-employment. For instance, the boom of the IT sector has resulted in the emergence of many new self-employed professions. To conclude, the Slovenian and Spanish reforms have aimed at reducing labour market segmentation between permanent and temporary workers by making permanent contracts more flexible and better adapted to labour market dynamics. At the same time, it was pointed out that any reduction in employment protection for permanent workers needs to be compensated by supportive active labour market policies. There is still the issue of alternative or atypical forms of employment which needs to be more specifically addressed. In this regard, supervision needs to be strengthened and new indicators need to be developed in order to measure the extent of this phenomenon and the effectiveness of steps taken to tackle it. November