Spain: Government Changes to Labor Policies Make it Cheaper to Discharge Older Workers

According to press reports, the Spanish government is taking steps towards ending a two-tier labor market that favors an older generation of workers with robust benefits who are very expensive to let go, but gives few rights to generally younger workers on temporary contracts. Specifically, the government plan would abolish contracts allowing severance packages of 45 days' pay for every year worked to employees deemed to have been unfairly dismissed, and instead would provide that employers firing staff will have to offer just 33 days' pay per year, or 20 days if the business is facing losses over a sustained period. In addition, it would cap severance pay at the equivalent of two years' wages, almost halving the limit from a previous 3 1/2 years.

Source: Reuters "Spain cuts firing costs in new labor reform" (February 10, 2012)

Another report says that the Spanish government is studying measures to allow older workers to remain employed and get a pension at the same time. According to the Minister for Employment and Social Security, Fatima Bañez, the plan is to reduce the number of early retirements to exceptional cases.

Source: EuroWeekly "Spain Plans To Allow Working While Receiving Pension" (February 14, 2012)