Employment Law Updates for 2002: Part One

Over the next two issues, we will outline the main employment law developments for 2002. These are set out primarily in Law 24/2001 of 27 December on Tax, Administrative and Social Order Measures, Royal Decree 1465/2001 of 27 December partially amending the legal framework governing death and survivor benefits, and Royal Decree Law 16/2001 of 27 December on measures to establish a system of gradual and flexible retirement.

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EMPLOYMENT PROMOTION – SUBSIDISED CONTRACTS:

The Employment Promotion Programme for 2001 has been extended through to 31 December 2002. This means that the same types of contracts and contribution subsidies as last year will remain in place throughout 2002.

AMOUNT OF THE WIDOWHOOD pension:

The percentage applied to the contribution base when calculating the widowhood pension has increased by 1%, rising to 46%, up from the previous 45%.

Where the widowhood pension constitutes the primary or sole source of income for the pensioner and they have dependent family members, the applicable percentage rises to 70% of the regulatory base.

The 46% rate will be applied automatically by the administration to pensions that arose before 1 January 2002, with effect from the first day of the current year.

By contrast, the 70% of the regulatory base rate will only be applied upon request by the person concerned, submitted no later than 31 March 2002, with effect from the beginning of the year.

ORPHAN'S pension:

The upper age limit for receipt of the orphan's pension has been raised to twenty-two years of age, or up to twenty-four years where neither parent has survived.

Should the orphan take up paid employment, whether as an employee or on a self-employed basis, the orphan's pension will be suspended until they cease that activity or the employment contract comes to an end, at which point entitlement to receive the pension will be restored.

PERMANENT DISABILITY:

Another significant development is the possibility of accessing permanent disability pensions even where the employee is aged 65 or over, provided the cause of the disability derives from a work-related accident or occupational illness.

Until now, it was only possible to apply for permanent disability if the claimant had not yet reached the age of 65; from that age onwards, the only option available was the retirement pension.

PENSION REVALUATION:

Contributory Social Security pensions that arose prior to 1 January 2002 will be increased by 2%.

Once revalued, the pension amount will be capped at €1,953.10 per month, equivalent to €27,343.40 per year.

UNEMPLOYMENT AND temporary disability (IT):

Where an employee is receiving temporary disability (IT) benefit and their contract is terminated during that period, they will continue to receive temporary disability (IT) benefit at an amount equal to the unemployment benefit until that situation comes to an end, at which point they will enter a state of statutory unemployment.

In all cases, the period during which the individual received temporary disability (IT) benefit following the termination of the employment contract will be deducted from their total entitlement to unemployment benefit as already consumed.

UNEMPLOYMENT subsidy FOR WORKERS AGED OVER 52:

The obligation to terminate the subsidy for workers over the age of 52 upon reaching any age that would entitle them to a retirement pension, that is, age 60, is hereby abolished.

From 1 January 2002, the individual may continue receiving this subsidy until the age of 65, it being understood that a retirement pension may be applied for at any earlier point.

Recipients of the subsidy must submit an annual declaration of income received to the Managing Authority, in order to verify their continued entitlement.

SPECIAL SOCIAL SECURITY CONTRIBUTIONS UPON CONTRACT TERMINATIONS THROUGH COLLECTIVE REDUNDANCY PROCEDURES:

Where a contract is terminated through a collective redundancy procedure involving companies not subject to insolvency proceedings, those companies will be obliged to pay the contributions required to establish a special agreement for workers aged 55 or over who did not hold mutualist status on 1 January 1967, until those workers reach the age of 61.

This obligation will apply only in relation to collective redundancy procedures initiated on or after 1 January 2002.

ABOLITION OF THE STAFF REGISTER BOOK:

The obligation for employers to maintain a Company Personnel Register has been abolished.

NEW REDUCTIONS ON Social Security CONTRIBUTIONS:

These reductions are a consequence of the new gradual, flexible system, compatible with continued employment, introduced from 2002 onwards.

    1.- Exemption from part of Social Security contributions for workers aged 65 or over:

The following exemptions from the obligation to make contributions apply to both employed and self-employed workers:

Social Security contributions in respect of common contingencies, except those relating to temporary disability (IT), are exempt for workers aged 65 or over who hold a permanent contract and can demonstrate 35 years of actual contributions, and who voluntarily choose to continue or resume their employment activity.

If, upon reaching the age of 65, the employee has not yet accrued 35 years of contributions, the exemption will apply from the date on which the 35 years of actual contributions are reached.

    2.- Reductions on Social Security contributions for workers aged 60 or over:

These reductions are compatible with those established under Employment Promotion programmes, provided that the combined total of the two reductions does not exceed 100%.

Permanent employment contracts concluded with workers aged 60 or over who have at least 5 years' seniority within the company will entitle the employer to a reduction of 50% on the employer's contribution in respect of common contingencies, excluding temporary disability (IT), on contributions accruing from 1 January 2002 onwards, with this reduction increasing by 10% each year until it reaches a maximum of 100%.

If, upon reaching the age of 60, the employee has not yet accrued 5 years' seniority within the company, the reduction will apply from the date on which that period of seniority is reached.