The Bank of Spain is in favor of the Government reviewing and clarifying the causes of the objective dismissal to avoid the high level of litigation surrounding its interpretation, according to Ángel Gavilán, the general director of Economy and Statistics of the institution. This position is one of the strong points of the employment chapter of the Bank of Spain’s annual report, presented this Tuesday.
“There is a very intense reallocation of activity between sectors and companies,” and regulation must be able to respond to this dynamic, since “hindering it will generate inefficiencies and losses of competitiveness,” stated Gavilán before pointing to the Lack of clarity when distinguishing an unfair dismissal from another.
“The causes and the rules of the game are not clear enough, and it would be important to clarify them,” he added. If the fair dismissal gives the right to compensation of 20 days per year worked, in the case of the unfair dismissal it rises to 33. The limit is 24 monthly payments.
The European Committee of Social Rights (CEDS), dependent on the Council of Europe, resolved at the end of March in response to a claim from UGT that compensation for unfair dismissal in Spain does not comply with the European Social Charter.
The government agreement between PSOE and Sumar establishes the commitment to establish “guarantees for workers against dismissal, in compliance with the European Social Charter.” The Minister of Labor, Yolanda Díaz, advocates a model with more personalized causes, and even speaks of expressions such as “restorative” or “reparative” dismissal.
The director of the Bank of Spain has indicated that the severance payments available in Spain “are relatively high in the international context”, while the cost of unfair dismissal is, however, not among the highest.
The Bank of Spain also urges in its annual report to increase incentives for the unemployed to return to employment. It calls for an “exhaustive review” of employment policies in the face of an unemployment rate that is “persistently higher” than that of other countries and the challenges posed by technological changes that come from robotics and artificial intelligence.
To achieve this, the formula involves refining the sufficiency of benefits while improving coordination with active employment policies. “Unemployment benefits must offer adequate protection to the unemployed, without damaging incentives to search for work and labor mobility,” he maintains.
The institution believes that there is room in Spain to “adjust” the eligibility requirements, the replacement rates of benefits, their variation depending on the duration of unemployment and the maximum duration itself. It also advocates allowing certain subsidies and benefits to be compatible with employment, temporarily or permanently.
In its report, it also warns that a possible increase in Social Security contributions will harm employment. For every percentage increase of one point in contributions, the number of employed people decreases by 0.25% after four years. It is a warning to the Government, which could be forced to increase this burden to guarantee the sustainability of pensions.
The report also confirms an increase in salaried public employment of 340,000 people in four years. It is growing faster than private employment and is already equivalent to 16.9% of the total, compared to 16.3% in 2019, it indicates.
Meanwhile, the number of people receiving the minimum wage increases, the amount of which has increased to 1,134 euros in 14 payments. If in 2018 only 5.1% of workers received it, the percentage will be 12.7% at the end of 2024, according to the forecasts of the Bank of Spain.
To these figures and percentages is added an interesting note about the lack of labor reported by various employers’ associations. The companies that declare a lack of labor in the surveys managed by the Bank of Spain have gone from 25% at the beginning of 2022 to 42.5% at the end of last year.
