The OECD indicators of employment protection legislation measure the procedures and costs involved in dismissing individuals or groups of workers and the procedures involved in hiring workers on fixed-term or temporary work agency contracts. It is important to note that employment protection refers to only one dimension of the complex set of factors that influence labour market flexibility. For information on other labour market policies and institutions in OECD countries, see the OECD Employment Database.
The indicators have been compiled using he Secretariat’s own reading of statutory laws, collective bargaining agreements and case law as well as contributions from officials from OECD member countries and advice from country experts.
The OECD employment protection indicators are compiled from 21 items covering different aspects of employment protection regulations as they were in force on January 1st of each year:
Individual dismissal of workers with regular contracts, incorporating three aspects of dismissal protection: (i) procedural inconveniences that employers face when starting the dismissal process, such as notification and consultation requirements; (ii) notice periods and severance pay, which typically vary by tenure of the employee; and (iii) difficulty of dismissal, as determined by the circumstances in which it is possible to dismiss workers, as well as the repercussions for the employer if a dismissal is found to be unfair (such as compensation and reinstatement).
Additional costs for collective dismissals. Most countries impose additional delays, costs or notification procedures when an employer dismisses a large number of workers at one time. The indicator measuring these costs includes only additional costs which go beyond those applicable for individual dismissal. It does not reflect the overall strictness of regulation of collective dismissals, which is the sum of costs for individual dismissals and any additional cost of collective dismissals.
Regulation of temporary contracts, including regulation of fixed-term and temporary work agency contracts with respect to the types of work for which these contracts are allowed and their duration, as well as regulation governing the establishment and operation of temporary work agencies and requirements for agency workers to receive the same pay and/or conditions as equivalent workers in the user firm, which can increase the cost of using temporary agency workers relative to hiring workers on permanent contracts.