ROME Italy has abolished voucher payments for workers, which were highly popular with employers, to avoid a bruising referendum championed by the country's main union, Prime Minister Paolo Gentiloni said on Friday.
Payment by vouchers was introduced in 2008 as an experiment for seasonal farm labourers. The flexible and unregulated form of payment was aimed at encouraging bosses to stop hiring workers on an illegal, ad hoc basis.
Its use has spread rapidly across many sectors, with 1.7 million people -- about 8 percent of all working Italians -- receiving some or all payment in vouchers in 2015, angering the CGIL union, which has promoted a referendum on the issue that was due to be held on May 28.
The ruling centre-left Democratic Party lost a referendum in December on constitutional reform, forcing the resignation of then prime minister Matteo Renzi, and the government is anxious to avoid another bruising ballot-box battle.
"We have done this in the knowledge that Italy does not need an election campaign on themes such as this in the months ahead," Gentiloni told reporters. He said cabinet had approved an emergency decree to abolish the vouchers, which must now be passed into law within 60 days.
The CGIL hailed the move as a "great success" but employers and centre-right political parties said it would push parts of the economy back into the shadows and complicate legal job creation.
Under the voucher system, workers are not paid directly in money but with certificates which the employer buys online, or at a post office or tobacconist, for 10 euros ($11), 20 euros or 50 euros each. [nL5N16I3ZJ]
Workers then cash their vouchers in and receive 7.5 euros for each 10 euros of face value, with 2.5 euros going to the state to cover insurance and pension contributions.
Without an employment contract, workers have no rights in areas such as sick pay, holidays or leave, while there are obvious advantages and savings for employers. Unions said bosses were also abusing the system, paying only some wages in vouchers and the rest in cash.
The government said it would work with unions on drawing up a replacement system.
The government also legislated to pre-empt another referendum that was slated for May 28, extending the rights of people working on projects assigned by tender processes as was demanded by the CGIL.
The Eurointelligence think-tank said the end of the easy-to-use vouchers showed the impossibility of reforming hidebound Italy, which has regularly underperformed other eurozone economies since the launch of the single currency in 1999.
"The underlying problem is that the chances of Italy converging towards the eurozone are nil, no matter who is in government," the British-based Eurointelligence wrote in a note.
(Additional reporting by Gavin Jones; Editing by Toby Davis)