Three years after the entry into force of the labor reform, The signing of permanent contracts has almost quintupled, while that of temporary contracts fell to less than half the average in the years preceding the standard. But the success of the new legislation does not seem to have extended to one of the biggest problems in the labor market: the conversion of temporary to permanent employment. The latest data from the State Public Employment Service (SEPE) confirms that only 5% of the possible has succeeded in reaching this stage, even if the standard has strengthened the conditions. However, Spanish companies seem to continue to ignore the issue.
Can talk about the “failure” of the law in this area? At first glance, the data seems conclusive. During the first ten months of 2024, 7.4 million temporary contracts and 5.13 million first permanent contracts were signed, but only 370,186 conversions. They represent just over half of the people registered during the same period of 2019, the last comparable year before the pandemic, when 707,172 people were registered. Meanwhile, storm extensions reach 931,621even if five years ago they exceeded 2 million.
Obviously, the key to this evolution is in the collapse of temporary jobs. As of October 2019, 17.2 million such contracts had been registered, more than double current levels. Only 9.7% of contracts (adding initials and conversions) were concluded: today they exceed 42%. But this does not mean that the possibility from temporary to stable employment has increased significantly. This means that the first is still very far from being a door to the second.
4.98% of temporary contracts signed in 2024 became permanent, according to data from the State Public Employment Service (SEPE). In 2019, they were 4.12%. Given the clear collapse of the former and the spectacular rebound of the latter initially signed, the proportional improvement seems very small. Especially if we consider that the reform abolished employment and service contracts and tightened the limits of the sequence of contracts which require their transformation into contracts of indefinite duration. If previously it was set at 24 months over a period of 30, the legal change reduced it to 18 within a margin of 24.
Conversions fall after reform
Labor reform provisions related to the disappearance of employment and service contracts and other changes such as chaining limits were not fully rolled out until April 2022, and that is when a historic rebound in absolute conversions was detected. which was followed by a collapse over the next two years.
But, as they say, this is consistent with the decline in temporary hiring. What’s not so surprising is that the temp-to-permanent conversion rate is also falling and returning to levels very similar to those before labor reform, after reaching 12.5% in the early days of its entry into force.
Especially because in none of the hiring indicators after the change in law was there such a sharp decline. In fact, even though hiring is down, this appears to be in response to greater job stability, which reduces turnover and the need for new hires. However, when companies must conclude contracts of indefinite duration they turn to new workers rather than those already working with thema pattern very similar to that before the legal change.
Several factors explain this resistance of companies to convert temporary jobs into permanent jobs. The first is the seasonal nature of many activities, which means that many businesses they cannot adapt to enter into more stable contracts.
The option of intermittent permanent contracts is complex for many SMEs and self-employed workers, discouraged by the risk of refusal from their employees and by pressure from the employer itself. Ministry of Laborpushing for this figure to be limited to recurring jobs that cannot be performed in regular permanent positions. This “clamp” means that more and more companies (including larger ones) are avoiding these contracts and opting for temporary contracts due to production circumstances.
The second is cost. Temporary workers accumulate seniority when they become permanent, which has an impact on their salary and any severance pay. A cost that employers not only take into account when deciding whether or not to convert, but how many times do they have to extend the same temporary job.
The big unanswered question
The rule not only reduced the maximum period for maintaining a temporary employee to 18 months in the last 24 months. It also established that, if a position was filled during this same period by temporary employment, the company is required to make the worker occupying it permanent at that time, even if he has not not worked in the company during this period. . That’s to say, Not only does the worker become permanent, but the position itself.
This tightening of deadlines had several objectives. The first was to reduce the number of workers stuck in a cycle of entering and exiting the same company over the years. The second, to strengthen the alternative of discontinuous fixed contracts to temporary work and service contracts. And the third, reduce temporality in a more sustained manner over time, beyond the immediate effect that the elimination of employment and service contracts had in the short term.
The decline in conversion rate reveals that, almost three years later, businesses have learned to work around these limits. This is aided by the fact that most extensions were granted for contracts of less than six months and temporary due to production circumstances (which continue to account for the majority of temporary contracts) and not due to work patterns and of missing services. In addition, There are sectors like the public sector in which labor reform is not applied and they continue to opt for temporary hiring.
The government assumes that there is a percentage of temporary jobs that a labor reform cannot eliminate if it is not accompanied by structural changes in the production model. But it is no less true that four out of ten contracts signed each month are for an indefinite period and the majority are concluded from scratch. Before the reform, 38% came from a temporary position, now they only reach 6.8%.
Although it is true that the contracts signed have been much fewer, the data shows that the government has failed to give with the “key” to encourage companies to convert to temporary work an indefinite period instead of concluding new contracts from scratch, neither by toughening legislation nor by carrying out labor inspection campaigns. In this scenario, no one seems very clear on what actions to take.
Some voices believe that the conversion should be made more flexible, that is to say less expensive, but Labor does not even want to hear about it. He believes that this is contrary to the spirit of labor reform which succeeded in triggering permanent hiring without affecting its cost. Of course, what it has failed to do is transform temporary employment into a gateway to stable employment.. Today, this remains the big unanswered question in the Spanish labor market.
