The CAE is in line with the Europe 2020 Strategy, especially in relation to the initiatives focused on the promotion of employment and entrepreneurship, and with the recent plans and strategies to boost youth employment (Youth Employment Initiative and the implementation of the Youth Guarantee) although it applies for the creation of stable jobs across all age groups. It is also coherent with the country specific recommendations of 2013 and 2014 which have pointed out that ALMP should be better targeted and combined with passive employment policies and that suggest introducing measures that help to tackle duality.

The Spanish labour market has been deeply affected by the recent economic crisis. Three million jobs had been lost in the three precedent years of the approval of the measure, which was adopted in the last labour market reform (February 2012). The employment rates, which in 2008 were at European levels (around 65%) dropped by 9 percentage points, five times the EU-28 average. This reduction was especially felt by young people (15-24), whose rates halved (36% to 18%). In this context, the overall unemployment rates multiplied by 2.5 and reached 24.6% in the beginning of 2012, the highest level among the EU Member States.

Moreover, the Spanish labour market has traditionally shown high temporary employment rates. During the expansion period (until 2008), the proportion of the workforce under temporary contracts was fairly higher than the EU-28 average, reaching around 30-34%. This lack of jobs stability affected especially young people (65%). Although many temporary jobs were destroyed during the economic crisis bringing down the share of temporary employment to 23.4% in 2013, the incidence of temporary jobs is still well above EU average. Duality has strong negative social consequences on working careers and on personal lives as well as on productivity and on the sectoral structure of the Spanish economy.

Hiring subsidies are considered to have stronger effects if they are well designed and launched during economic recessions. Temporary jobs are very often used as probationary periods in Spain. SME face higher risks than larger firms to hire permanent workers.

The main issue addressed by the CAE is the promotion of stable employment in a context of a recession, with credit restrictions and high uncertainty. It targets also a higher quality job rich recovery. This especially applies for younger and older unemployed workers, for whom specific hiring incentives are included.

The main aim of the CAE is the promotion of stable employment and to ease entrepreneurship. The CAE aims to limit the still high Spanish temporary employment rates as it formally constitutes an open-ended contract with a longer probationary period. The CAE can only be used by small firms (less than 50 workers) and it is therefore designed as an instrument to benefit them.

Permanent job contract with a one year probationary period (no severance payment) linked to hiring subsidies:

• It carries a one-year trial period (compared to 3 to 6 months in other permanent contracts) with no severance payment. This applies for all workers hired under the CAE
• The CAE entitles smaller firms that recruit certain individuals on a permanent basis to receive fiscal rebates and pay lower social security contributions:
  • The first youngster (up to 30) hired under the CAE entitles the firm to receive a 3,000€ fiscal rebate. Furthermore, the firm is entitled to Social Security rebates for three years of 1,000-1,200€;  women: 1,100-1,300€),  long term unemployed older than 45: 1,300€ (women: 1,500€)
  • Additionally, if the worker has been receiving unemployment benefits for more than three months, the firm  can receive an additional fiscal rebate equal to 50 % of the amount that the worker is entitled to receive (up to 12 months); and the worker can receive up to 25 % of his/her total unemployment benefit
  • Firms benefiting for these hiring incentives and tax rebates should maintain the new job for 3 years and the total workforce for one year or return the subsidy (unless dismissal or contract extinction is justified)
  • Firms cannot ask for subsidies if they have unfairly dismissed any worker in the previous 6 months. Firms should enlarge the workforce with these hirings
• In December 2013, the CAE was extended to part-time employment to encourage their use by employers, especially among young people. Hiring subsidies and tax rebate are proportional to working time in the part-time job

In total, 197,737 contracts have been arranged between February 2012 and May 2014. Among them:

• Men (60%) - Women (40%)
• 43% workers under 30y
• Low-skilled (15%)-Medium-skilled (65%)
• High-skilled (20%)
• Subsidized contracts (40%; 58% under 30y)
• Not subsidized contracts (60%)
• CAE represent around one fifth of total permanent contracts registered by SME
• Survival rate close to the ordinary permanent contracts. Data do not show a drop of survival rate at the end of the probationary period (between 12th and 13th month)