UPDATE 1-French employers cede ground in labour reform talks

Fri Jan 11, 2013 12:14pm EST

* Talks on labour reform expected to conclude on Friday

* Employers offer concession on core union demand

* Negotiated deal would be win for Hollande

By Nicholas Vinocur and Yann Le Guernigou

PARIS, Jan 11 (Reuters) - French employers offered concessions on unions' core demand in talks to overhaul labour rules on Friday, raising the chances of an agreement that would bolster President Francois Hollande's credibility as a reformer.

Hollande is pressing business leaders and workers' representatives to agree changes to the labour code that would help companies respond more quickly to crises while improving job security for employees on short-term contracts.

In a sign that an agreement may be achieved, the Medef employers union submitted a new draft document including raising the welfare contributions they make on behalf of short-term contractors, something that employers had refused to consider.

"There are significant advances but they are not sufficient. There are still a few points to agree on before we have a deal," said Patrick Pierron, negotiator for the moderate CFDT union in talks which restarted on Thursday after an end-of-year break.

The draft also showed concessions from the unions, including new rules on cutting working hours and jobs during downturns.

Hollande's Socialist government has said it will introduce legislation on labour reform, which credit ratings agencies among others say is necessary to improve competitiveness, early in 2013 regardless of whether a deal is struck.

But working from a negotiated deal would add legitimacy to a draft law while proving that Hollande is able to reform through consensus on highly sensitive labour changes, which generations of governments have failed to do.

With his approval ratings mired at about 37 percent and jobless claims at a 15-year high, a deal would bolster Hollande's credibility on the economic front as he leads a broad effort to improve competitiveness.

RESOLVING LABOUR MARKET SPLIT

The talks represent a last chance for a negotiated deal as employers have warned they will not extend them. A previous round ended on Dec. 21 with deep disagreement.

They aim to address concerns that France's labour market is split in two, with "insiders" on long-term CDI job contracts enjoying too much security, while "outsiders" - often younger workers or women - struggle on employer-friendly contracts.

Eight out of ten new hires are on contracts of less than a month and, compared with an overall unemployment rate above 10 percent, nearly 25 percent of people aged 18 to 25 have no job.

A draft deal seen by Reuters included a proposal to increase employer contributions to unemployment funds for contracts lasting less than a month to 7 percent from 4 percent, and to 5.5 percent for those between one and three months. It excluded seasonal or temporary contracts.

It also contained better working conditions for temporary workers, broader rights to complementary healthcare insurance and wider access to jobless benefits.

Union concessions included easing conditions for putting workers on reduced time and pay during a downturn. A national unemployment fund would make up the differences in wages.

Rules for laying off workers, which many firms say are too complex and costly, may be made simpler also. The time limit for challenging unfair dismissal is likely be shortened to 18 months from 5 years.

However, the latest draft deal made no reference to so-called "project" or "intermittent" contracts, a middle ground between super short-term and more rigid long-term CDI contracts.

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