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‘The labor reform will bring cost overruns between 12% and 20%’

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'The labor reform will bring cost overruns between 12% and 20%'

The labor reform project has set off alerts from various business sectors, considering that it may have a negative impact on job creation and formality, due to the new charges and costs that companies should accept.

From the Colombian Federation of Human Resources Management (Acrip), Gladys Vega, president of the National Board of Directors and of the Central Region, explained to Portafolio some risks that the union perceives, such as the increase in the cost of hiring, the impact on MSMEs, among others.

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What impact can the labor reform project have for companies?

The labor reform can have several impacts on companies and also on workers. One of the main ones is that the project does not serve a very important and vulnerable sector of the population, which are informal employees and also the unemployed. It makes them invisible. It makes it much more difficult for those who are in the informal sector to become formal.

Likewise, for companies, the labor reform proposal will generate cost overruns that will end up affecting productivity and, therefore, generating greater unemployment. These cost overruns are evident in issues of overcharges, contracting, compensation and others, which can have a negative impact mainly on MSMEs, which represent almost 90% of the country’s business fabric.

What are some of these additional costs?

The Government intends to generate some responsibilities for the business sector in terms of social protection that should be assumed by the State, but not by companies. What this will do is make it very difficult to maintain a model of business and labor stability, it will end up representing that the youngest have more complications to enter the labor market.

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And, finally, the labor reform is highly thought out from the perspective of trade union organizations, ignoring the needs of the business sector, which are the generators of employment, and the rights of other workers who do not belong to unions.

An alert launched by several unions about the reform is that it could make formal hiring more expensive, how much could it affect companies?

It is one of the main concerns. According to calculations by various associations, the cost overruns for companies that could be generated by the labor reform are between 12% and 20%. This would imply that companies, to avoid cost overruns, reduce their staff or stop the generation of new jobs. Something that would of course impact Colombians, would increase unemployment, but it would also affect the productivity of companies, economic growth, and there is a huge risk that this will discourage foreign investment.

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Which sectors could especially feel these changes?

The labor reform can impact all sectors, and we reiterate that the most worrying thing is that it can impact small firms, which represent the largest number of companies in the labor market. However, those economic sectors that are the largest generators of employment could be more affected, such as: the manufacturing industry, the transport and storage sector, the vehicle trade and repair sector, and professional and scientific activities.

How do you see the proposal in relation to limiting contracts for the provision of services and labor?

Undoubtedly, this proposal can benefit an important sector of employees who have a constant labor relationship with the organizations and for whom the full rights enjoyed by other employees with more formal contracts are not guaranteed.

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However, the proposal must be thoroughly reviewed since the opportunity for companies to temporarily strengthen specific processes cannot be limited, without this generating cost overruns, which is what most worries the business community.

On the other hand, it must be taken into account that many workers with contracts for the provision of services work in something called “self-employment”, for whom this type of modality has benefits in terms of flexibility.

Do you think informality will increase?

The labor reform as it is proposed can increase informality due to the risk of cost overruns, especially for MSMEs.

Among all these observations, what do you think is positive about the reform?

One of the positive aspects, although they must be more refined, is the regulation that is sought on issues such as work hours or digital applications. The country has been in debt for some time already in being able to have the necessary regulations for it. Likewise, it is positive that the Government intends to work and legislate on some aspects of diversity and inclusion, fundamental for the development of the country.

The key points of the labor reform

Among the main elements of the bill is the definition of the ordinary working day of 8 hours of work and a maximum of 42 hours a week, distributed between 5 or 6 days.

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In addition, the day of day job from 6:00 a.m. to 6:00 p.m.and the night from 6:00 pm and the 6:00 a.m. the next day.

Another of the relevant points is the figure of ‘reinforced job stability’, which establishes that certain population groups may only be terminated with just cause or with a legal cause, in addition to an administrative or judicial order, such as: pensioners, pregnant women or people with disabilities.

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Also, the proposal for the regulation of work in technological distribution platforms stands out in the project. The articles define which activities are classified as these, and the cases in which workers must be linked to a labor contract.

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