June 15, 2021

What is the formula for the ‘Austrian backpack’ proposed by the Bank of Spain?


MADRID

Updated:

Keep

The proposal to implement the Austrian ‘Austrian backpack’ is back on the table. In your annual report,
the Bank of Spain bets once again on this formula based on a capitalization fund for each worker
which can be accessed at the time of retirement as a supplement to the pension, in the form of severance pay or partially if there is a change of company. The central entity describes a mechanism in which a 50% reduction in current dismissal costs is set for companies that, to compensate, they would have to pay for the ‘backpacks’ of their staff at the rate of six days per year worked up.

Thus, each company would have to allocate a predetermined percentage of the gross salary of its workers to a capitalization fund. In other words, it is a kind of savings account in the name of the employee that is managed by private funds to generate additional profitability. A) Yes, this income is added to the capital provided by each company that is part of the worker’s working life. The piggy bank goes with each worker from company to company and the contributions are added over the years plus the profitability generated.

In the current scenario, the Bank of Spain advocates launching the ‘Austrian backpack’ with a base coming in part from European funds of 8,031 million in four years – at a rate of five days per year worked in the first year, four in the next one, then three and finally two.

Compensation

The way to fix the contributions to the dismissal would depend on those agreed in each company. The piggy bank for dismissal can be nurtured from a percentage subtracted from each payroll or as a bonus to the salary contributed by the company in the style of occupational pension plans. There may also be cases in which a higher salary is set in the new contracts that takes into account these contributions to the so-called ‘Austrian backpack’.

The defenders of this tool defend that if the company changes, the worker takes with him that saving generated instead of having to start counting his seniority again from scratch in order to calculate the future compensation. Companies also win in the sense that they can pay for layoffs progressively rather than having to pay out severance all at once.

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