An estimated 5.3 million Spaniards have short term contracts. That represents about a third of all Spain’s salaried workers, more than double the rate for the EU as a whole.
Unions say Spain has more workers on temporary contracts than Britain, Italy and Belgium put together.
The new employment law offers companies various incentives for creating permanent contracts.
For every temporary contract that a company changes into a permanent contract by the end of 2006, the firm will get 800 euros reduction in the annual social security contributions it pays, for a maximum of three years.
Spain brought in short-term contracts over 10 years ago to curb an unemployment rate of more than 20 per cent.
But employers’ organisations admit the measure has been abused, and the Zapatero government regards fixed-term contracts as a handicap to productivity.
To qualify automatically for a permanent contract, workers must have had at least two temporary contracts with the same company in the same job for more than 24 months within any 30-month period.
Everyone else must negotiate the switch with their employer on a case by case basis.
Companies and the self-employed are to get bonuses of up to 3,200 euros per worker per year if they hire certain categories of unemployed people:
women, people under 30 or over 45, disabled people and those on training contracts.
The new law also aims to reduce the cost to firms of firing workers: 30 days’ rather than 45 days’ pay for every year in employment.
Spain’s Deputy Prime Minister, Maria Teresa Fernandez de la Vega, said: “It will increase job stability, in the context of precarity, which is a structural problem that we have to fight. We’re doing that without introducing rigidities, we’re maintaining flexibility in our jobs market.”
Two bodies representing self-employed
workers and small firms say the reforms do not increase flexibility.
Meanwhile Spain’s Labour Minister Jesus Caldera says he expects up to 1.5 million workers to upgrade to permanent contracts by the end of 2007.