In its first year of use, a Spanish labor contract called the Contrato indefinido para emprendedores shows that one of the biggest pending issues of the nation's labor reform is how to hire employees. Recently, the European Commission has made the same point. According to data from the Ministry of Employment, 82% of entrepreneur contracts last just one year.
This kind of contract lets business owners hire employees under a trial period during which the employee is not entitled to severance if the job is not a good fit. During tough economic times like these, business owners prefer to have the freedom to let a worker go before the worker takes advantage of job benefits like healthcare, retirements savings and, most important, severance.
For one thing corporate tax bills, which have fallen significantly thanks to reduced revenues, are not the main concern for companies. If consumption really does fall off, then company spending will need to be trimmed, too. To do this, most business owners that use contratos indefinidos are giving up a more favorable tax benefit (up to 7,000 euros in discounts) that they would receive for keeping an employee for at least three years.
Employers also want to use this type of contract when hiring part time workers. Surely, these contracts will offer companies more flexibility and is more reasonable than Germany's minijobs. A 27% unemployment level calls for new employment strategies that can give better options to the young and the long-term unemployed. These are the true victims of the crisis. The Ministry of Employment should deepen its labor reforms and simplify the myriad kinds of hiring contracts that are currently available, which is the main way that we can cut extra jobs and reduce unemployment at the same time.
