The Spanish labor market is bearing its teeth toward temporary workers by penalizing them excessively. That is the verdict of the European Commission, who highlight concerns in a recent report titled “Wage Adjustment in Spain: slow, inefficient and unfair?” (PDF) published by the Directorate-General for Economic and Financial Affairs.

According to the report, “temporary workers are more likely to lose their jobs and suffer from salary cuts than workers with fixed-term contracts.” As a matter of fact, the European Commission explain that Spanish temporary workers have suffered from a salary reduction “between three and four times larger” than permanent staff.

The European Commission’s message to Prime Minister Mariano Rajoy is clear: Spain should review the law so as to eradicate the duality in the market. It is a reality that “could lead to a slow and inefficient adjustment process, which would disproportionately penalize temporary workers.” They explain that “results show the need to implement a reform in labor legislation,” which should balance working conditions by reducing the gap between permanent and temporary contracts.

The European Commission also denounces the “relatively high level of protection in employment provided in legislation for workers with open-ended contracts.” Since decisions surrounding dismissals are affected by the cost of the compensation required, the Spanish labor market encourages firms to dismiss permanent workers at the lowest rung on the ladder…

Temporary workers do not have such problems, because the cost of their dismissal allows the most qualified workers to remain at the company.

Another big problem is that most of the temporary contracts in Spain are fraudulent, at least 60 percent of them.

Huge differences between temporary and open-ended contracts are usually the result of salary problems and company agreements, which are quite different from sector agreements.

The current labor law in Spain is permissive, which means labor protection is almost nonexistent for new workers. The European Commission notes that between 2008 and 2013, the economic and financial crisis destroyed almost 3.5 million jobs in Spain, a drop in employment of 16 percent.

What can be done to close the gap between temporary and permanent contracts in Spain? Faustino Cavas, professor and head of the Labor Law Department at the University of Murcia, spoke to The Corner:

“Both at Community and national level, temporary workers have the same rights as permanent workers. However, the precariousness of their jobs and the weakness of their contractual position prevents them from fully enjoying their rights on equal terms,” he says.

“Be that as it may, Spain should work to encourage open-ended contracts by prosecuting illegal temporary recruitment and by fostering working stability by means of collective bargaining. They should also synchronise the cost of contract expiration both in temporary and permanent contracts,” Mr Navas advises.

This story first appeared at The Corner, Spain’s only English-language financial news website, November 2, 2014.