France's parliament has passed a bill to replace the defunct youth employment contract, which sparked major protests.
Some students were still protesting on Tuesday
The compromise plan includes state support for employers hiring young people facing "the most difficulties in gaining access to the labour market".
Deputies in the National Assembly passed the bill by 151 votes to 93.
The government announced on Monday it was scrapping the youth labour law after widespread opposition prompted strikes across the country.
Critics of the original CPE (First Employment Contract) feared it would undermine job security.
About 30 amendments were proposed to the text, which will now go to the Senate (upper house) for a vote there, expected to be held on Thursday.
NEW YOUTH LABOUR MEASURES
Employers receive subsidies when they take on 16- to 26-year-olds 'in difficulty' on permanent contract
Cost: 150m euros in 2006, 300m euros in 2007
Yet to be approved by the Senate
Parliament hopes to wrap up the vote before it goes into recess for the Easter holidays from Monday.
Employment Minister Jean-Louis Borloo gave a broad outline of the new provisions in an interview to Le Monde newspaper on Monday.
"The new bill establishes the principle of state aid to employers taking on young people in difficulties on a contract for an indeterminate period.
"These provisions concern the youngsters aged between 16 and 26 experiencing the greatest difficulties in gaining access to the labour market."
These are defined as young people who lack qualifications, live in disadvantaged areas or are on a Civis contract (access to social work contract).
Mr Borloo told the National Assembly on Wednesday that the new law was largely based on existing measures.
On Tuesday, only half of France's 62 universities that were not closed for holidays were functioning normally, the education ministry said.
Demonstrations drew at least 2,500 people onto the streets of Toulouse on Tuesday, reports said.
Smaller demonstrations took place in Grenoble, Marseille, Paris and Rennes.
The CPE was to allow a two-year trial period for employees aged under 26, during which bosses could end a contract without explanation.
Prime Minister Dominique de Villepin had championed the CPE as a way to bring down France's 22% youth unemployment.