Alexandre Georgieff
OECD Employment Outlook 2026
Geographic Disparities in Jobs and Incomes
Abstract
Regulations affecting the hiring and dismissal of workers – i.e. employment protection legislation (EPL) – affects the ability of companies to adapt to fluctuation in demand and structural changes as well as people’s job security and hiring opportunities. This chapter presents an up-to-date review of EPL in OECD countries, based on the latest update of the OECD EPL indicators. Considering both legislation and actual practices, it describes the regulations governing individual and collective dismissals of employees on open-ended contracts, as well as the rules applicable to the hiring and termination of temporary contracts. It shows that common-law countries generally have fewer restrictions, while European civil-law countries tend to have stricter regulations. It also highlights a clear trend towards harmonising the protection of workers on open-ended contracts and strengthening the regulations of temporary contracts since the onset of the COVID‑19 crisis, marking a break with the trends of easing regulation for open-ended contracts observed during the previous decade.
Employment protection legislation (EPL), i.e. regulations on the hiring and dismissal of employees, aims at protecting workers against arbitrary job termination and having companies bear some of the social costs of separations. EPL affects the labour market in many ways, e.g. through job transitions, job and worker flows, worker bargaining power, and the incidence of temporary contracts. It can therefore influence people’s job security, career path and working conditions, as well as the ability of companies to adapt to fluctuations in demand and structural changes (e.g. induced by the digital transformation, the move toward carbon neutrality, demographic ageing, or changes in the international trade environment) in a fair and effective manner.
The OECD indicators of Employment Protection Legislation measure job termination regulations for open-ended and, since the last edition, fixed-term contracts, covering four dimensions of regulation: i) procedural requirements before termination notice is given; ii) notice period and severance pay; iii) the regulatory framework for unfair dismissals; and iv) enforcement of unfair dismissal regulation. They also aim to capture constraints to the ease with which temporary employment (both fixed-term contacts and temporary work agency assignments) can be used. The chapter extends the database, last updated in 2019, to 2025 and describes recent trends in employment protection in OECD countries, with a particular focus on the termination of fixed-term contracts and the corresponding new indicators.
The main findings are as follows:
Whether considering regulations on dismissals of workers on open-ended contracts or regulations on temporary contracts in general, common-law countries generally have fewer restrictions, while EU civil-law countries tend to have stricter regulations. Common-law countries with available data all rank in the bottom half of OECD countries in terms of both the overall EPL indicator for temporary workers and of the overall EPL indicator for open-ended contracts. In contrast, a majority of EU civil-law countries rank in the top half for each of these two indicators.
The stringency of dismissal regulations for workers on open-ended contracts increases with job tenure. Notice period and severance pay both tend to be higher the longer the job tenure, with the increase being more pronounced for severance pay. For a worker with four years of job tenure, the average duration of the notice period across the OECD is 1.3 months, and the average amount of severance pay is 1.1 months of pay. These values are respectively 2.1 times and 3.4 times lower than for a worker with 20 years of job tenure, and 1.6 and 3.4 times higher than for a worker with only 9 months of job tenure.
Thirty-one of the 36 OECD countries with available data impose more restrictions on collective dismissals than on individual dismissals of workers on open-ended contracts. Almost all OECD countries require a consultation with a third party or an authorisation before the dismissal can take place from a certain threshold number of employees dismissed, extending the time delay before notice can be given from 9 days to 30 days on average across countries. These higher restrictions reflect the greater challenge that collective dismissals pose to local economies and to workers’ search for a new job.
Countries with high overall dismissal regulation for workers on open-ended contracts typically have strict regulations in the three broad categories of procedural requirements, notice and severance pay, and regulatory framework for unfair dismissals; but this is not the case for enforcement of unfair dismissal regulation. The median of the maximum time to make a claim of unfair dismissal among OECD countries is two months.
In all OECD countries with available data, there are few or no restrictions on the termination of fixed-term contracts at the end date. Limited restrictions are in force at the end of the contract in about one‑fifth of countries and include notice periods, severance pay, or priority given to fixed-term employees for hiring under permanent contracts.
In virtually all OECD countries, dismissal regulation is at least as strict during the execution of a fixed-term contract (i.e. before the expiration date) as it is during an open-ended contract.
However, in about one‑third of OECD countries, employers can use a large number of successive very short-term contracts without interruption, and therefore can retain the option of terminating the employment relationship at virtually any time – as there is no limit on the number of successive fixed-term contracts. When there is a limit, it is generally between two and four successive contracts (three on average across countries).
As a result, fixed-term contracts can be terminated at any time at virtually no cost in about a quarter of OECD countries, including some common-law countries where regulation governing the dismissal of workers on open-ended contracts is relatively lenient, but also in a few countries where regulation for workers on open-ended contracts is relatively strict.
About half of OECD countries impose restrictions on the type of work for which fixed-term contracts are allowed; compared with two‑thirds of countries for temporary work agency (TWA) employment. Most countries also impose limitations on the cumulative duration of successive fixed-term contracts and TWA assignments, which average 41 and 26 months, respectively.
Most EPL reforms implemented since the onset of the COVID‑19 crisis have focussed on: (i) harmonising regulation among dismissals of workers on open-ended contracts – mostly by limiting the discretionary power of courts in the event of dispute and by aligning protection for blue‑collar workers with that for white‑collar workers –, with generally small or positive effects on the corresponding EPL indicators; and (ii) strengthening regulation of temporary contracts. This marked a break with the trend toward relaxing dismissal regulations for workers on open-ended contracts, while keeping regulations on temporary contracts approximately unchanged, observed in many countries over the decade following the 2008‑2009 global financial crisis.
These recent reforms could help reduce labour market dualism by making dismissal regulation for workers on open-ended contracts more predictable and temporary contracts less attractive and more difficult to use.
Recent reforms of other types of work and workers, such as variable hours (or “on-call”) contracts or vulnerable self-employed people, could also reduce labour market dualism.
OECD labour markets are undergoing profound transformations. Rapid advances in artificial intelligence and other digital technologies (OECD, 2023[1]), the move of many countries toward carbon neutrality (OECD, 2024[2]), and shifts in international trade dynamics are changing the nature of jobs and their distribution across firms, sectors and regions. At the same time, demographic ageing is altering the size and composition of the workforce, raising challenges for labour supply and GDP per capita (OECD, 2025[3]).
Regulations governing the hiring and dismissal of employees – i.e. employment protection legislation (EPL) – can influence countries’ ability to navigate these changes fairly and effectively. EPL aims to protect workers from arbitrary dismissals and to make companies bear part of the social costs of their dismissals. It has been shown to affect various labour market outcomes, including job and worker flows, job transitions, worker bargaining power, productivity or the incidence of temporary contracts (Section 6.1).
This chapter provides a comprehensive overview of EPL in OECD countries and recent reforms in this area. It does not seek to analyse the effects of these reforms. Rather, it describes regulations as in force on 1 January 2025 and their recent changes, relying on the OECD EPL indicators, which quantify the costs and procedures involved in dismissing individuals – or groups of employees – and using temporary contracts.1 The OECD has published estimates of the strictness of employment protection in member countries since the early 1990s (Grubb and Wells, 1993[4]; OECD, 1999[5]; 2004[6]; 2013[7]; 2020[8]; Venn, 2009[9]). These indicators have been extensively used by governments, organisations and researchers for cross-country benchmarking in reports, books and academic papers.
The chapter is organised as follows. Section 6.1 provides an overview of the ways in which EPL can affect countries’ ability to navigate temporary shocks and long-term labour market transformations. Section 6.2 describes dismissal regulation for workers on open-ended contracts in 36 OECD countries.2 Section 6.3 presents regulation of temporary contracts, including a new indicator for termination of temporary contracts. Section 6.4 looks at employment protection reforms in the OECD during 2019‑2025 and how they are reflected in the indicators.3
Dismissal regulation aims to protect workers from arbitrary dismissals and to make companies bear part of the social costs of their dismissals (e.g. fiscal costs and lower fiscal revenues) (Pissarides, 2010[10]; Scarpetta, 2014[11]). It also promotes efficient worker reallocation by helping workers transition to their next job. These effects of dismissal regulation are particularly important at a time of cyclical labour market turbulence (such as the repeated disruptions in the global value chain recently experience by OECD countries) and profound labour market transformations – whether driven by global megatrends (e.g. the digital transition) or policy changes such as tariff increases. Dismissal regulation can also make these transformations more equitable by supporting a balanced distribution of their costs and benefits between workers and firms. Finally, dismissal regulation can support demographic ageing by preventing discriminatory practices against older workers and ensuring that firms internalise some of the significant social costs of dismissing them.
However, if overly strict, dismissal regulation can reduce labour markets’ ability to adapt fairly to fluctuations in demand and structural changes. It can excessively hinder job and worker flows, and thus adaptation to new market conditions and technology adoption, thereby hampering productivity growth. Strict dismissal regulation can also replace permanent contracts with temporary ones or other forms of employment, thereby segmenting the labour market between a small number of very protected jobs and many jobs that can be easily terminated, especially in countries where restrictions on hiring under temporary contracts are weak or poorly enforced. By reducing aggregate employment protection, the widespread use of temporary contracts can reduce training incentives, decrease the labour share, worsen working conditions, increase wage inequality, and leave a disproportionate share of the social costs of transitions on workers and governments – see also OECD (2014[12]; 2020[8]).
6.1.1. If not too strict, dismissal regulation can smooth labour market adjustments and help labour markets navigate ongoing job transformations
If not too strict, dismissal regulation can smooth labour market adjustments, which is particularly important at a time of profound labour market transformations.
Dismissal regulation reduces inefficient incentives for firms to dismiss a worker that can arise when the firm does not take into account the consequences of the job separation for fiscal revenues (due to lower labour income) and fiscal costs (higher expenditure on income replacement programmes) (Cahuc, Carcillo and Zylberberg, 2014[13]), but also on health (Bassanini and Caroli, 2015[14]) and destruction of human capital (Neal, 1995[15]).
Job dismissal regulation can also help workers transitions to new jobs by encouraging them to search for a new job while still employed, during the notice period. In fact, recent quasi‑experimental evidence from Sweden has shown that not only does a longer notice period lead to lower nonemployment and higher post-unemployment wages, but also that job search is more effective during the notice period than during unemployment (Cederlöf et al., 2024[16]). This corroborates previous findings from US survey data that on-the‑job search is more effective and leads to better job offers than job search during unemployment (Faberman et al., 2022[17]).
Another way dismissal regulation can ease the transition to new jobs is by providing income security to dismissed workers (through severance payments) and by facilitating transition measures – e.g. outplacement services, early interventions by the public employment service (PES), social plans or transition initiatives4 – although unemployment benefits and re‑employment assistance are generally the preferred policy levers for achieving these objectives. Dismissal regulation can indeed require certain transition measures to be met before a dismissal is considered fair or allow more time to implement them before dismissals take place through the notice period5 (OECD, 2018[18]).
When considering the digital transition, for example, additional ways in which dismissal regulation can smooth this transition are by: (i) counterbalancing its negative effects on the labour share and (ii) helping to address some of its ethical issues. AI-driven growth indeed tends to be concentrated in large firms and favour industry concentration, which has negative effects on the labour share (Autor et al., 2020[19]; Babina et al., 2024[20]; Minniti, Prettner and Venturini, 2025[21]). Beyond forcing firms to internalise some of the social costs of the transition, EPL can help redirect the benefits of AI to labour by strengthening worker bargaining power (Ciminelli, Duval and Furceri, 2018[22]; Ciminelli and Franco, 2025[23]; Falk, Huffman and Macleod, 2015[24]). Dismissal regulation can also help address the ethical challenges raised by the impact of AI on working conditions: for example, recent court cases have invalidated dismissal decisions “made” solely by AI (New Zealand, 2013), or motivated by a worker’s refusal to use fingerprint scanners to sign in and out of work (Australia, 2019) (OECD, 2023[1]).
6.1.2. Dismissal regulation can protect older workers who are able to work longer
Population ageing will require older individuals to participate more in the labour market to maintain current levels of GDP per capita and social protection spending (OECD, 2025[3]). Yet, firms can be reluctant to retain or hire these workers, who are generally perceived as relatively costly: seniority wage‑setting practices can widen the gap between wage and productivity of older workers, and firms’ perception of this gap is further reinforced by negative age‑related stigma – e.g. older workers are often perceived as less adaptable or lacking ICT skills (OECD, 2019[25]). In addition, the consequences of job loss tend to be particularly severe for older workers, who are more likely to leave the labour force permanently after losing their jobs (OECD, 2025[3]).
Dismissal regulation has a role to play in preventing discriminatory dismissals of older workers. Mandatory retirement, a regulatory scheme that removes (or reduces) dismissal regulation above a certain age6 and exists in about two‑fifths of OECD countries, can facilitate age discrimination in dismissal (OECD, 2025[3]; 2025[26]; Raub, Stek and Heymann, 2023[27]).7 Rulings of the Court of Justice of the European Union set the limits within which mandatory retirement can be considered lawful and non-discriminatory in EU countries (Dewhurst, 2016[28]; Oliveira, 2016[29]). These limits take into account, among other criteria, how the mandatory retirement age is justified (e.g. for safety reasons) and determined (e.g. by a collective agreement), as well as eligibility for a full pension (OECD, 2022[30]). Evidence from France, the Netherlands and Sweden show that removing EPL at or after full pension age increases job separations among the workers concerned, suggesting that, at slightly younger age where EPL is binding, EPL effectively protects older workers from dismissal (Saez, Schoefer and Seim, 2024[31]; Rabaté, Jongen and Atav, 2024[32]; Rabaté, 2019[33]).
In most countries,8 stricter regulation on the dismissal of older workers reduces the number of such dismissals and ensures that firms internalise some of the significant social costs associated with dismissing them. As might be expected, stricter dismissal regulation for older workers reduces the number of dismissals of these workers (Schnalzenberger and Winter-Ebmer, 2009[34]), and increases firms’ incentives to train them (Messe and Rouland, 2014[35]). However, it can also have a number of adverse effects: it can further reduce firms’ incentives to hire older workers (Kryńska et al., 2013[36]; Behaghel, Crépon and Sédillot, 2008[37]), it may discourage older workers’ from changing jobs9 (OECD, 2025[3]), and, as discussed in the previous section, it can increase older workers’ exposure to temporary employment. Increased dismissal regulation for older workers may also encourage firms to circumvent this enhanced protection by offering early retirement arrangements. Finally, stronger dismissal protection for older workers may lead firms to replace dismissals of older workers with those of their younger colleagues (Georgieff and Lepinteur, 2018[38]).
6.1.3. If too strict, dismissal regulation can excessively hinder labour market adjustments and replace open-ended contracts with temporary contracts
The intended effect of job dismissal regulation – consistent with the objectives of protecting workers against arbitrary dismissals and having employers bear some of the social costs of dismissals – is that layoffs are less frequent than they would be in the absence of regulation. A large number of empirical studies confirm that dismissal regulation reduces job and worker flows, in terms of layoffs but also in terms of hiring and voluntary quits.10
Although it reduces excessive turnover, hindering job and worker flows can also overly hamper firms’ ability to adapt to fluctuations in demand, as well as the transformation and reallocation of jobs in the face of structural changes, thereby hampering productivity growth. In particular, empirical analyses at the industry level show that strict dismissal regulation is associated with less reallocation of workers from low-productivity to high-productivity firms and less technology adoption (Andrews and Cingano, 2014[39]; Bravo-Biosca, Criscuolo and Menon, 2016[40]; Cette, Lopez and Mairesse, 2019[41]), and quasi‑experimental analyses indicate that dismissal regulation alters production processes in a way that reduces firm-level total factor productivity growth (Autor, Kerr and Kugler, 2007[42]; Bjuggren, 2018[43]; Caggese et al., 2022[44]; Ciminelli and Franco, 2025[23]; Cingano et al., 2015[45]). Reduced hiring opportunities can also deepen pre‑existing labour market divides (Butschek and Sauermann, 2022[46]).
Strict dismissal regulation can also increase labour market dualism, i.e. the extent to which firms replace less flexible open-ended contracts with more flexible temporary contracts (Centeno and Novo, 2012[47]; Hijzen, Mondauto and Scarpetta, 2017[48]). By reducing aggregate employment protection, the widespread use of temporary contracts can reduce training incentives (Adrjan, Jessen and Victoria-Lanzon, 2026[49]; Bratti, Conti and Sulis, 2021[50]; Damiani, Pompei and Ricci, 2016[51]), decrease the labour share (Daruich, Di Addario and Saggio, 2023[52]), worsen working conditions and increase wage inequality (Autor and Houseman, 2010[53]; García-Pérez, Marinescu and Vall Castello, 2018[54]; OECD, 2014[12]), and leave a disproportionate share of the social costs of transitions on workers and governments.
Therefore, strict dismissal regulation for workers on open-ended contracts typically calls for strict hiring regulation for temporary workers. Empirical analyses of reforms aimed at strengthening restrictions on the use of temporary contracts in three countries with strict dismissal regulations – Italy (2018), Portugal (2009) and Spain (2022) – indeed suggest a negative impact on the incidence of temporary employment in these three countries, with generally a positive impact on the incidence of open-ended employment and limited overall employment effects11,12 (see Box 6.3 in Section 6.4.2, Adrjan, Jessen and Victoria-Lanzon (2026[49]), Cahuc et al. (2023[55]), Grasso and Tatsiramos (2023[56]) and OECD (2024[57])).13
However, restrictions on the use of temporary contracts may be difficult to enforce (OECD, 2013[7]), and even with strict hiring regulation for temporary workers, overly strict dismissal regulation for workers on open-ended contracts can lead to labour market dualism that is then hard to tackle. Although restrictions on hiring under temporary contracts are now strict in Italy, Portugal and Spain, these contracts remain widespread, accounting for around 15%‑16% of dependent employment in 2024 in these three countries, compared with 12% in OECD EU countries overall – see the Statistical Annex at the end of this publication. In fact, restrictions on the use of temporary contracts were already relatively strict in Spain before the 2022 reform (Section 6.4), while the incidence of temporary employment was among the highest in the OECD (between 24% and 27% over the 2015-2021 period). Substantial non-compliance with temporary contract regulations can be explained by the lack of clarity of the regulatory framework,14 challenges concerning collective representation (permanent workers form the core of trade union membership), as well as temporary workers’ vulnerability – in particular, workers may have little incentives to challenge the misuse of temporary contracts in court, given their limited employment opportunities (Bosmans, De Moortel and Vanroelen, 2021[58]; Eurofound, 2017[59]).
This section compares dismissal regulations for workers on open-ended contracts in OECD countries, based on the OECD indicators of EPL for regular workers.15 These indicators evaluate, for both individual and collective dismissals, employers’ dismissal costs for workers on open-ended contracts, focussing on four aspects: procedural requirements (which capture the actions that the firm must take before or when issuing the dismissal to the worker), notice period and severance pay, the regulatory framework for unfair dismissals (i.e. the breadth of the definition of fair and unfair dismissals and the stringency of remedies imposed by courts when a dismissal is judged to be unfair) and enforcement of unfair dismissal regulation (i.e. the extent to which regulations make unfair dismissal procedures more or less likely) (Box 6.1).16 They refer to no-fault dismissals; hence, the stated reason for the dismissal is not related to alleged worker’s misbehaviour (such as, e.g. theft, misconduct or unauthorised absence from work). They also exclude explicitly prohibited grounds (e.g. discrimination or violation of civil right legislation)17.
The EPL indicators for regular workers include four items related to enforcement of unfair dismissal regulations: i) the maximum time to make a claim of unfair dismissal; ii) whether the worker alone has the burden of proof when filing a complaint for unfair dismissal; iii) whether there is an ex‑ante validation of the dismissal – validation of the dismissal as a preventive check tends to make notification procedures more stringent but it has the advantage for the firm of limiting the risk that the dismissal will be judged as unfair later on – ; and iv) whether resignation or mutual agreement, by granting eligibility for unemployment benefits, offers an attractive alternative to dismissal for the employee (OECD, 2020[8]).
In most countries, following an unfair dismissal complaint, it falls, at least in part, on the employer to provide evidence that the dismissal was fair. The only OECD countries where the burden of proof lies solely with the employee in cases of unfair dismissal (not based on prohibited grounds) are Australia, Colombia, Czechia, Denmark, Israel, Poland, the Slovak Republic, Switzerland and the United States.
Only in Austria and the Netherlands, all dismissals are subject to an advance validation that limits the scope for unfair dismissal complaints; dismissals should be approved by the work council in Austria and the Public Employment Service or the Sub-district Court in the Netherlands. A validation secures the dismissal for the employer, but only from a given number of workers dismissed, in Belgium (in some cases), Colombia, France, Greece, Mexico and Spain.
Resignation and/or some form of termination by mutual consent provide the right to unemployment benefits in many countries, sometimes subject to sanctions or waiting periods, and can therefore constitute a common alternative to dismissals. Cross-country approaches nevertheless differ substantially.
In a first group of countries, resignation and/or termination by mutual consent provide access to unemployment benefits without specific penalties beyond the standard eligibility conditions applying to dismissed workers. This is the case in Austria, Chile, Colombia, France, Hungary, Japan, Korea, Lithuania, Mexico (where there are no unemployment benefits), the Netherlands and the Slovak Republic. In some of these countries (e.g. Hungary and the Slovak Republic), this is the case for both resignation and termination by mutual consent. In other countries, such as France, the Netherlands and Portugal, unemployment benefits are generally available following termination by mutual consent, but not after a simple resignation (except under very specific conditions). In addition, in the Netherlands, eligibility may depend on the agreement explicitly stating that the initiative came from the employer, while in Portugal access is largely restricted to cases linked to restructuring or economic difficulties. In France, all terminations by mutual consent (“rupture conventionnelle”) give entitlement to unemployment insurance under the same conditions as dismissal, although forthcoming reforms1 aim at tightening some parameters of the scheme.
In a broader set of countries, including Denmark, Estonia, Germany, Poland, Sweden, Switzerland and the United Kingdom, resignation and/or termination by mutual consent also give access to unemployment benefits, but with sanctions such as waiting periods, temporary benefit suspensions or reduced entitlements.
By contrast, except under very specific circumstances (e.g. health reasons, care responsibilities, discrimination or harassment), neither resignation nor termination by mutual consent normally give access to unemployment benefits in Canada, Greece, Italy, Luxembourg, Slovenia, Spain and Türkiye. Similar restrictions also apply in the United States.1
Nevertheless, the coverage of enforcement issues in the EPL indicators remains limited overall. In particular, the indicators do not account for aspects related to the functioning of the judicial system, such as access to labour courts or the length of proceedings. This is because these aspects influence firms’ dismissal decisions (Espinosa, Desrieux and Ferracci, 2018[60]; Gianfreda and Vallanti, 2017[61]), but also employees’ incentives to file a complaint (Campolieti and Riddell, 2018[62]; Espinosa, Desrieux and Wan, 2017[63]; Fraisse, Kramarz and Prost, 2015[64]), so that their overall impact on dismissal costs for employers remains theoretically ambiguous. In addition, the lack of comparable data across countries and the endogeneity of judicial outcomes to regulations and labour market conditions (Ichino, Polo and Rettore, 2003[65]) make it difficult to include statistics on legal proceedings in the indicators.
1. In most states in the United States, employees who voluntarily quit without good cause are not eligible for unemployment benefits, although employees who accept a voluntary separation package in a situation where an insufficient number of workers take such voluntary separation packages may be eligible for unemployment compensation under specific circumstances.
This section relies on three separate indicators, assessing regulation of individual dismissals, regulation of collective dismissals (i.e. when a firm lays off several workers at around the same time), and overall dismissal regulation. The overall employment protection legislation indicators for dismissing workers on open-ended contracts is a weighted average of the two formers, assigning a weight of 5/7 to the indicator for individual dismissals and 2/7 to that for collective dismissals.18
This section presents an update of the main analysis provided in OECD (2020[8]) based on the 2019 EPL indicators. Detailed information on all specific aspects of dismissal regulations for workers on open-ended contracts is not presented here, but can be found in OECD (2020[8]), supplemented by Section 6.4 of this chapter for aspects of the regulations that have been reformed since 2019. Annex 3.A in OECD (2020[8]) also provides additional details on the structure and full scoring scale used for the three EPL indicators concerning open-ended contracts.19
6.2.1. Regulation of individual dismissals of employees on open-ended contracts
The OECD indicator of employment protection of regular workers against individual dismissals (EPR) brings out international differences in labour market and social models quite strongly (Figure 6.1). English-speaking countries, with British common-law origin, rank in the bottom half in the OECD with respect to this indicator. Regulation is assessed to be low as well in Costa Rica, and a few European countries (e.g. Switzerland, Hungary, Austria, Denmark and Estonia). By contrast, eight of the ten countries with the highest EPR are civil-law EU countries, and two‑thirds of the 21 civil-law EU countries are in the top half in terms of this indicator.
2025
Note: OECD indicator of employment protection of regular workers against individual dismissals (EPR), version 4. Range of indicator scores: 0‑6 from least to most restrictive. The overall strictness indicator assigns the same weight to the four broad categories.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
According to the EPR and its components, countries with high overall dismissal regulation for workers on open-ended contracts typically have strict regulations along the three categories procedural requirements, notice and severance pay, and regulatory framework for unfair dismissals (Figure 6.1); but this is not the case for enforcement of unfair dismissal regulation. In particular, the United States20 has some of the least stringent regulations overall, while scoring highly in this dimension. This is because the time period during which an employee can file an unfair dismissal complaint can be long in the United States.
The median of the maximum time to make a claim among OECD countries is two months. However, it is longer than two years in the United States (where it, however, varies by state),21 as well as in Colombia and Japan. By contrast, in some countries (Austria, Denmark, Hungary, Lithuania, Slovenia, Switzerland and Türkiye), claims must be filed before the dismissal takes effect.22
Looking specifically at the wages paid to a dismissed worker after notice of dismissal, whether in the form of notice period or severance pay, and for a worker with four years of job tenure, they vary widely among OECD countries, from no compensation in the United States to six months of pay in Türkiye (Figure 6.2, Panel A). At this level of tenure, the average duration of the notice period across countries is 1.3 months, and the average amount of severance pay is 1.1 months of pay.
In addition, notice period and severance pay both tend to increase with job tenure (Figure 6.2, Panel B), with the increase being more pronounced for severance pay. On average across countries, notice period and severance pay are respectively 2.1 times and 3.4 times lower at 4 years of job tenure than at 20 years, and 1.6 and 3.4 times higher than at 9 months of job tenure. In addition, average severance pay is smaller than average notice period at 9 months of job tenure, but greater at 20 years of job tenure.
In months of pay after dismissal notice, 2025
Note: These values are for individual (not collective) dismissals. They take the average of dismissals for personal and economic reasons. Panel B: OECD average is the unweighted average for the 36 OECD countries analysed.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
6.2.2. Regulation of collective dismissals of workers on open-ended contracts
Cyclical factors, such as downturns in product demand, and changing attitudes toward labour hoarding, as well as structural trends, such as the digital transformation and the move toward carbon neutrality, could force firms to restructure their workforces, resulting in the dismissal of large numbers of workers in a relatively short period of time. Considering the greater challenge that these dismissals pose to local economies and to workers’ search for a new job (see for example Chapter 3), most OECD countries have put in place additional dismissal regulation that apply from a certain number of workers dismissed in a given period of time. This section presents employment protection legislation for collective dismissals, i.e. dismissals of several workers at around the same time (irrespective of whether specific regulations apply), relying on the OECD EPL indicator for collective dismissals.
The EPL indicator for collective dismissals (EPC) takes into account the same elements of regulation as in the indicator for individual dismissals23 but applying to dismissals of 10, 45 and 120 workers by a firm within one month.24 In all OECD countries where specific regulations apply above a certain number of dismissals (and for the firm sizes covered by the indicator), these regulations always apply in the event of 120 or more workers being laid off in the same month25 – in other words, the threshold for the application of these specific regulations is always less than 120 workers. Regulations relating to the dismissal of 120 workers or more will be referred to as “mass dismissals regulations” in the rest of this chapter.26
Figure 6.3 presents the indicator for collective dismissals. It also shows, for comparison purposes, the indicator for mass dismissals and a specific, recalculated indicator for individual dismissals for economic reasons to allow a proper comparison,27 given that collective dismissals always occur for economic reasons (and that the OECD indicators for individual dismissals described above reflect both dismissals for economic and personal reasons). In one‑third of OECD countries, the dismissal threshold for collective dismissals to be subject to specific regulations is (or is equivalent to) ten or less workers in one month. In these countries, the indicator for mass dismissals is therefore28 equal to that for collective dismissals. By contrast, the dismissal threshold is particularly high in Australia, Colombia, Japan and the United States. This explains the relatively large difference between the indicator for mass dismissals and that for collective dismissals in these countries.
2025
Note: OECD indicator of employment protection against collective dismissals (EPC), version 4. Range of indicator scores: 0‑6 from least to most restrictive. Individual dismissals refer to economic reasons, because collective dismissals are always for economic reasons. The indicator for collective dismissals scores the average of the values for 10, 45 and 120 dismissals within one month. The regulation of mass dismissals corresponds to the regulation of collective dismissals above the country‑specific threshold for a series of individual dismissals to be subject to different legislation. The definition of at least 120 workers on open-ended contracts ensures that this threshold is passed in all countries with dedicated legislation for a series of individual dismissals. In Mexico, the indicator for individual dismissals for economic reasons takes the maximum value because legislation does not allow individual dismissals for economic reasons, only collective dismissals can be implemented for economic reasons.
Source: OECD calculations based on OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
Regulation of collective dismissals tends to be stricter in countries where regulation of individual dismissals is stricter, as in practice regulation of individual dismissals often serves as a minimum for that of collective dismissals (Figure 6.3).
All OECD countries with available data – with the exceptions of Chile, Costa Rica, Korea, Mexico and New Zealand – impose more stringent restrictions on collective dismissals relative to individual dismissals (Figure 6.3).29 Chile, Costa Rica, Korea and New Zealand regulate collective dismissals the same as individual dismissals; Mexico is a peculiar case, as legislation does not allow individual dismissals for economic reasons, while only collective dismissals can be implemented for economic reasons.
The EPL indicator for collective dismissals is 15‑20% higher than that for individual dismissals for economic reasons in the OECD on average, mostly because of stricter procedural requirements before notice can be given (Figure 6.4).30 In fact, notification procedures for mass dismissals are more homogeneous and stricter than for individual dismissals. All OECD countries analysed, with the exception of Chile, Costa Rica, the United States, and certain provinces in Canada, require consultation with a third party or an authorisation before the dismissal can take place above a certain threshold of workers dismissed. By contrast, this is only systematically31 the case in eight countries for individual dismissals for economic reason (Czechia, Finland, Germany, Korea, the Netherlands, New Zealand, the Slovak Republic and Sweden). As a result, on average across countries, the time delay before notice can be given is 30 days for mass dismissals, compared with 9 days for individual dismissals for economic reasons.32
2025
Note: Range of indicator scores: 0‑6 from least to most restrictive. Individual dismissals refer to economic reasons, because collective dismissals are always for economic reasons. The indicator for collective dismissals scores the average of the values for 10, 45 and 120 dismissals within one month. Mexico is excluded, as legislation does not allow for individual dismissals for economic reasons. The chart decomposes the difference between the EPL indicator for collective dismissals and the EPL indicator for individual dismissals into the differences between each of their broad components.
Source: OECD calculations based on OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
A few countries stand out with certain components of the indicator being lower for collective dismissals than for individual dismissals: enforcement of unfair dismissal regulation in Belgium, France, Greece and the United States; and regulatory framework for unfair dismissal in Switzerland (Figure 6.4). These differences can be explained by the reduced risk of dismissal being challenged in court in the event of mass dismissals in Belgium, France, Greece and the United-States, due to: (i) shorter time limits to make a claim for unfair dismissal (Belgium and France), (ii) administrative authorisation (France, Greece) and (iii) eligibility for unemployment benefits when taking a voluntary separation package, under certain conditions, in most states in the Unites States. In Switzerland, the maximum compensation for unfair dismissal is lower in the event of mass dismissals (two months’ pay compared to six months for individual dismissals).33
6.2.3. Overall regulation of dismissing workers on open-ended contracts
The EPL indicator of overall regulation of individual and collective dismissals of workers on open-ended contracts is similar to that for individual dismissals (and collective dismissals) taken separately in terms of (i) country rankings (Figure 6.5) and (ii) the relative importance of the four broad components of the indicators (Annex Figure 6.A.1). As a result, common-law countries (i.e. Australia, Canada,34 Ireland, New Zealand, the United Kingdom and the United States) rank in the lower half in terms of the overall indicator for dismissing workers on open-ended contracts (EPRC), while about two‑thirds (13) of the 21 OECD EU civil-law countries rank in the upper half; and countries with high EPRC generally have high components for all subcategories, except for the enforcement of unfair dismissals regulations (Annex Figure 6.A.1).
2025
Note: OECD indicator of employment protection of regular workers against individual and collective dismissals (EPRC), version 4. Range of indicator scores: 0‑6 from least to most restrictive. These aggregate indicators assign a weight of 5/7 to individual dismissals and 2/7 to collective dismissals.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
An important aspect of job protection regulations relates to the difference between workers on open-ended and temporary contracts, especially fixed-term contracts. Terminating an employment relationship at the end of a fixed-term contract is much less costly for employers than dismissing an employee on open-ended contract. To tackle the excessive use of temporary contracts, governments generally impose restrictions on their use and, in some countries, add termination costs when a contract expires.
This section compares regulations of temporary contracts in OECD countries, based on the OECD Employment Protection Legislation indicators for temporary workers. They focus on restrictions on the use of fixed-term contracts and temporary work agency assignments,35 as well as termination costs for fixed-term contracts.36
6.3.1. Regulation on the termination of fixed-term contracts
This section presents employment protection against terminating fixed-term contracts in OECD countries based on the new OECD indicator of protection against termination of fixed-term contracts (EPTT) (see Box 6.2 for a description of the design of this indicator). This is done in relation to regulations of individual dismissals of workers on open-ended contracts, in order to compare the regulations applying to fixed-term and open-ended contracts. The qualitative information underlying the coding of the EPTT is available in Annex Table 6.A.2 in Annex 6.A.
Versions 1‑3 of the EPL indicators for temporary contracts were limited to hiring restrictions for workers on fixed-term or temporary work agency contracts. With Version 4, the scope of these indicators has been extended to termination costs of fixed-term contracts to capture more adequately the overall level of regulation of temporary contracts and the degree of institutional dualism in the labour market.
An indicator of protection against individual termination of fixed-term contracts (EPTT) has been constructed based on the same model as the indicator of protection of workers on open-ended contracts against individual dismissals (EPR), discussed in the previous section. In particular, it takes into account the same four broad aspects of dismissal regulation: (i) procedural requirements, (ii) notice period and severance pay, (iii) the regulatory framework for unfair dismissals and (iv) enforcement of unfair dismissal regulation. These categories are defined from a number of lower-level elements (or items) following the structure described in Table 6.11 For the EPTT, however, the regulation is assessed exclusively for a worker with 9 months of tenure, while the EPR takes into account several durations of tenure.2, 3
In virtually all OECD countries, a fixed-term contract can be terminated at the end date for any reason4 and with few or no restrictions, while dismissal regulation is usually at least as strict before the contract expiry date as it is in the case of an open-ended contract (Annex Table 6.A.2).5 In fact, in about one‑third of countries, regulation governing dismissal (without fault) is even stricter for a fixed-term contract.6 As a result, employers should generally wait until the end of the contract – rather than terminating it before the end date – to minimise the costs associated with terminating a fixed-term contract (Cahuc, Charlot and Malherbet, 2016[66]).
Note: The weights provided are the final weights used in the indicators. The four broad categories of dismissal regulation determine with equal weight (25%) the aggregate score; the lower-level elements determine with equal – or almost equal – weight the scores of the four broad categories. Annex Table 6.A.1. provides the full scoring scale.
In virtually all OECD countries, the EPTT therefore reflects the termination costs incurred when the employer decides to wait until the end of a fixed-term contract; termination of the contract before the end date is not taken into account. Accordingly, the time delay before notice can be given (item 2) generally corresponds to the period between the employer’s decision to terminate the employment relationship and the actual end of the fixed-term contract, while the notice period (item 3) is equal to zero.7 The delay between the employer’s decision to terminate the employment relationship and the end of the fixed-term contract (item 2) is set at: (i) at zero when the contract is not renewed for economic reasons, on the assumption that, unlike insufficient performance or unsuitability, employers can anticipate changes in activity and adjust ex-ante the duration of the contract; (ii) evenly distributed between zero and the “baseline” duration (i.e. half the baseline duration) in the event of non-renewal for personal reasons, the baseline duration being taken equal to the maximum cumulative duration divided by the maximum number of successive contracts.8 Overall, the period referred to in item 2 is considered to be equal to the average between that for non-renewal for economic (i.e. zero) and that for non-renewal for personal reasons, i.e. half that for non-renewal for personal reasons.
Only in Switzerland does the EPTT reflect the termination costs when a worker is dismissed before the end of their contract rather than those incurred when the employer decides to wait until the end of the contract. This is because fixed-term contracts can be terminated for any reason and at relatively low costs9 before their end date if stipulated in the contract, whereas it can be costly to wait until the contract expires.
In all countries, the EPTT reflects regulations allowing terminations of contracts for any reason (except for explicitly prohibited grounds – e.g. discrimination or violation of civil right legislation –, not covered by the EPL indicators), either because it considers the termination costs incurred when the employer decides to wait until the end of the contract or, in the case of Switzerland, because the contract can be terminated for any reason before its term. There is therefore no possible dispute over the reasons for termination. As a result, all aspects of regulations dealing with the application and enforcement of unfair dismissal regulations are assigned a score of zero in the EPTT indicator. These correspond to items 6, 7, 8, 9, 22, 23 and 24 in Table 6.1. Annex Table 6.A.1 in Annex 6.A provides the full scoring scale for all other items of the EPTT.
1. The four broad categories determine with equal weight the aggregate score, and the lower-level elements determine with equal weight the scores for the four broad categories.The only exception is the lower-level category notice and severance pay, in which severance pay carries a slightly higher weight (4/7) than notice period (3/7). The rationale is that workers can still contribute to the firm’s output while on notice. Consequently, the net cost to the firm is higher for one month of severance pay than for one month of advance notice.
2. In the EPR, notice period and severance pay are assessed at three different tenures (9 months, 4 years, and 20 years) (Table 6.1 column (1)) and compensation following unfair dismissal is assessed at 20 years of tenure.
3. In Sweden, the cumulative duration of fixed-term contracts is assumed to be less than 12 months over a three‑year period, so no notice period is required and there is no priority for re‑hiring. Where relevant, the contract duration is assumed to be equal to the maximum cumulative duration of fixed-term contracts divided by the maximum number of successive contracts. When regulation and judicial practices do not impose any limit on the maximum number of successive contracts, a succession of very short-term contracts is assumed. For example, in Alberta (Canada) and Colombia, contracts are considered short enough so no notice period is required.
4. Unfair dismissal rules apply to both permanent and fixed-term contracts (before and at the end) in Ireland (unless explicitly excluded in the employment contract) and the United Kingdom. Therefore, the end of a fixed-term contract is no longer a fair reason for termination after expiry of the probationary period in these two countries (at 6 months of tenure in Ireland and 24 months in the United Kingdom). At 9 months’ tenure, unfair dismissal rules can apply at the end of a fixed-term contracts in Ireland only. However, in Ireland, the indicator considers the most favourable case for the employer, i.e. when the contract explicitly excludes unfair dismissal rules. Disputes may also arise in all countries concerning the non-renewals of fixed-term contracts on explicitly prohibited grounds (such as discrimination or violation of civil right legislation), but terminations involving these grounds are not considered in the EPL indicators.
5. Dismissal regulation is significantly less restrictive before the end of a fixed-term contract than during an open-ended contract in only two OECD countries. In Switzerland, the fixed-term contract can be terminated at any time if specified in the employment contract. In Italy, the layoff tax that the employer has to pay when dismissing a permanent employee is not due when dismissing a worker with a fixed-term contract, and, in the event of unfair dismissal, the employer has to pay the remaining wage until the end of the contract, compared to 6 to 36 months of pay for workers on open-ended contracts.
6. In Colombia, Costa Rica and Estonia, for example, the employer must pay the remaining wage until the end of the contract in case of termination of a fixed-term contract before its end date (for economic reasons in Colombia and Estonia). The remaining wage until the end of the contract is awarded by the court to an unfairly dismissed fixed-term employee in Chile, Colombia, France and Portugal. In Portugal, the severance pay is higher and the probationary period is shorter for fixed-term employees than for permanent employees. The probationary period is also substantially shorter for fixed-term employees in France, Lithuania, the Netherlands and Spain (in the case of training contracts). Fair reasons for dismissal are mainly limited to cases of serious misconduct or unsuitability before the end of a fixed-term contract in France, Greece, Japan and Luxembourg.
7. Item 3 is different from zero at the end of a fixed-term contract only in Japan and Portugal. In Japan, the notice period is the same as for an open-ended contract (i.e. one month) after three or more renewals. In Portugal, a notice period of 15 days is required at the end of a fixed-term contract (this period is however deducted from item 2).
8. Where regulations and judicial practices do not impose any limit on the maximum cumulative duration of fixed-term contracts, item 2 is assigned the maximum score (6). Where they do not impose any limit on the maximum number of successive contracts, the delay for item 2 is considered to be equal to one day.
9. The only regulations applying to the termination of a fixed-term contract before its end date are the same notification procedure and notice period as for the dismissal of a regular employee.
Figure 6.6 shows the EPTT indicator of protection against terminating fixed-term contracts and its decomposition into the relevant subcomponents (see Box 6.2): notification procedures (item 1), the period until the end of the contract – i.e. the sum of (i) the delay before notice can be given (item 2) and (ii) the notice period (item 3) –, severance payments (item 4), and the priority for hiring a fixed-term employee on a permanent contract37 (item 5). It is presented together with an ad hoc indicator of protection for workers on open-ended contracts against individual dismissals, which reflects the degree of protection at 9 months of tenure (EPR at 9 months), to allow a meaningful comparison between the level of protection for permanent employees and that for fixed-term employees (the EPTT reflects regulation applying at 9 months of tenure while the traditional EPR takes into account three different tenure levels: 9 months, 4 years and 20 years).38
2025
Note: Range of indicator scores: 0 to 6 from least to most restrictive. In virtually all countries, the EPTT reflects the termination costs incurred when the employer decides to wait until the end of a fixed-term contract, and termination of the contract before the end date is not taken into account (see Box 6.2). EPR at 9 months is made of the sub-components of the original EPR aggregated using the same weights as those used to construct the EPTT (see columns (2) of Table 6.1), except that the sub-component compensation following unfair dismissals is assessed at 9 months of tenure instead of 20 years. The United Kingdom is a particular case, as the probationary period is longer than 9 months (see note 38). The component period until the end of the contract corresponds to the sum of the scores for item 2 (time delay before notice can be given) and item 3 (notice period) (item 3 is only different from zero in two countries: Japan and Portugal).
Source: OECD calculations based on OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
In 10 countries – including four of the six common-law countries –, there is no limit on the number of successive fixed-term contracts, so employers can use a large number of successive very short-term contracts and terminate the employment relationship at virtually any time. In these countries, the time between the employer’s decision to terminate the employment relationship and the end of the contract is therefore very short. This is the case in Canada, Colombia, Ireland, Latvia, Lithuania, Mexico, Slovenia, Sweden, the United Kingdom and the United States. All other countries have limits on the number of successive contracts, whether explicitly defined in law or implicitly in judicial practices – courts tend to sanction successive fixed-term contracts in some of the countries without legal restrictions, considering that these contracts hide a permanent employment relationship. Fixed-term contracts are therefore longer in these countries, and so is the period between the employer’s decision to terminate the employment relationship and the end of the contract.
In most OECD countries, the only termination cost reflected in the EPTT is this period until the end of the fixed-term contract (Figure 6.6).39,40 In only two countries (Japan and Portugal), this period should include a notice period, i.e. the non-renewal of the contract should be notified in advance to the worker. A few countries have additional restrictions that apply at the end of the contract, including severance pay (France, the Netherlands, Portugal, Slovenia and Spain), and priority given to fixed-term employees for hiring under permanent contracts (Korea, Portugal)41 (Figure 6.6). The detailed aspects of these regulations are presented in Annex Table 6.A.2.
As expected given that restrictions on the termination of fixed-term contracts at the end date are light or absent, termination costs, as assessed by the indicators, are significantly lower for fixed-term contracts than for open-ended ones in virtually all OECD countries (Figure 6.6). The only exceptions are Costa Rica and the United Kingdom (at 9 months’ tenure), where dismissals of workers on open-ended contracts are allowed for any reason, which is not explicitly prohibited (e.g. discrimination or violation of civil right legislation).42 Furthermore, in Costa Rica, the duration of a fixed-term contract can be relatively long, which can lead to significant delays between the employer’s decision to terminate the employment relationship and the end of the contract.43
Fixed-term contracts can be terminated at any time at virtually no cost in about a quarter of OECD countries, which therefore have the lowest EPTT score (Figure 6.6).44 These countries include some common-law countries where dismissal regulation for workers on open-ended contracts tends to be loose (Canada, Ireland, the United Kingdom and the United States), but also a few countries where regulation for workers on open-ended contracts is relatively strict (e.g. Latvia or Mexico) and where there is therefore a substantial degree of regulatory dualism in the labour market.45
By contrast, four countries stand out by combining substantial delays until the contract termination date – due to limits on the maximum number of successive fixed-term contracts – with severance pay (France, the Netherlands, Portugal,46 and Spain). These countries also have relatively strict dismissal regulations for workers on open-ended contracts – they rank in the top half of OECD countries in terms of the indicator of regulation for workers on open-ended contracts.
6.3.2. Regulation of hiring fixed-term employees
The EPL indicator for hiring regulation on fixed-term contracts quantifies the regulations governing hiring of workers on fixed-term contracts, i.e. the types of work for which these contracts are allowed, their number of renewals, and their cumulative duration. Further details on the structure and full scoring scale used for this indicator are provided in OECD (2020[8]).
Fixed-term contracts are allowed in all OECD countries analysed and require no justification in about half of them. In the other half, the use of fixed-term contracts must be justified by “objective reasons” or a “material situation”, i.e. to perform a task that is itself of fixed duration (e.g. seasonal work, temporary increase of workload). This is the case, for example, in Costa Rica, Türkiye and, with limited exemptions, Estonia, France, Greece, Luxembourg, Mexico and Norway (Figure 6.7). Other countries allow more frequent exemptions, based on the specific needs of either employers or employees.
2025
Note: Range of indicator scores: 0‑6 from least to most restrictive.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
About three‑quarters of OECD countries impose limits on the duration of successive contracts – which are particularly short in Chile, France and Spain: 12 to 18 months, compared to an average of 41 months across countries.47 Fewer countries (about half) impose legal restrictions on the number of renewals or successive fixed-term contracts, within the maximum cumulative duration (Figure 6.7) – two renewals on average across countries – although, as discussed in the previous section, courts tend to sanction successive fixed-term contracts even in some countries where there are no legislated restrictions on the number of renewals (e.g. in Denmark, Finland, Japan, Korea, New Zealand, Norway and Switzerland). Some countries (e.g. Belgium, Czechia, Germany, Italy, Poland and Sweden) have different restrictions depending on whether the fixed-term contract is justified by objective reasons, with a shorter maximum cumulative duration or a lower maximum number of contracts in the absence of justification.
6.3.3. Regulation of hiring temporary work agency workers
Similar to the indicator for hiring regulation on fixed-term contracts, the EPL indicator for temporary work agency contracts quantifies the regulation governing the use of temporary-work-agency employment in terms of the types of jobs for which it is allowed and the limits on the number and cumulative duration of successive assignments at the user firm. The indicator for TWA contracts also covers some of the regulations governing the operation of temporary work agencies and the requirements for agency workers to receive the same pay and/or working conditions as similar workers on open-ended contracts in the user firm. Further details on the structure and full scoring scale used for this indicator are provided in OECD (2020[8]).
About two‑thirds of OECD countries impose some restrictions on the types of work for which TWA employment is allowed. Only common-law countries (Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States) as well as Denmark, Germany, Hungary, Switzerland, Latvia and Lithuania (Figure 6.8) allow TWA employment without justification. As a result, nearly three‑quarters of countries that restrict the type of work for which fixed-term contracts are allowed also restrict the type of work for which TWA employment is allowed (only Denmark, Hungary, Ireland, Latvia, Lithuania and New Zealand have such limitations for fixed-term contracts but not for TWA employment). In many countries, restrictions on the type of work allowed are stricter for TWA employment than for fixed-term contracts. For example, TWA employment must be justified by objective reasons in several of the countries that require no justification for fixed-term contracts: Belgium,48 Chile, Colombia, Korea (with the exception of 32 narrowly defined occupations), Poland and the Slovak Republic. Another example is Mexico, where temporary work agency employment was banned in April 2023 (Section 6.4).
2025
Note: Range of indicator scores: 0‑6 from least to most restrictive. TWA: temporary work agency.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
Almost two‑thirds of OECD countries have limitations on the cumulative duration of successive TWA assignments (Figure 6.8), which averages 26 months.49 The maximum duration of assignments is particularly short in Belgium (six to 18 months depending on the reason for using TWA employment), Chile (three to six months), Colombia (one to 12 months), Korea (six to 24 months), and Türkiye (six to eight months). On the other hand, less than half of OECD countries impose restrictions on the number of renewals or successive assignments.
TWA operations are strictly controlled in about half of OECD countries. In these countries, TWA typically can operate only after obtaining a licence from the relevant government authority and providing sufficient financial guarantees. Moreover, to keep their licence, TWAs should generally show compliance with regulations through regular reporting.
A large majority of OECD countries guarantee equal pay and working conditions for TWA workers and workers on open-ended contracts in the user firm – although sometimes only after a certain duration of assignment (e.g. 12 weeks in the United Kingdom or 6 months in Hungary). Only Chile, Costa Rica, and a few common-law countries (most provinces in Canada, New Zealand and the United States) do not have such provisions for equal treatment.
6.3.4. Overall regulation of temporary contracts
The new Version 4 of the overall indicator of regulation of temporary contracts (EPT) takes into account, with equal weighting, each broad category of hiring regulation (i.e. for fixed-term and temporary work agency employment) and the new category specific to the termination of fixed-term contracts (Table 6.2).
As in the case of regulation of dismissals of workers on open-ended contracts, common-law OECD countries have relatively weak regulation for terminating temporary contracts, while OECD European countries with civil-law systems tend to be more regulated. Specifically, the six common-law countries (the United States, the United Kingdom, Canada, New Zealand, Ireland and Australia) are among the ten OECD countries with the lowest EPL indicator for temporary contracts (Figure 6.9). By contrast, seven of the ten countries with the highest score are civil-law European countries, and a majority (12) of the 21 OECD EU civil-law countries are in the top half in terms of the indicator.
2025
Note: OECD overall EPL indicator for temporary contracts (EPT), Version 4. Range of indicator scores: 0‑6 from least to most restrictive. This aggregate indicator assigns the same weight to hiring regulation of temporary contracts and termination of fixed-term contracts, with hiring regulation for fixed-term contracts and temporary work agency employment contributing in equal shares to hiring regulation for temporary contracts.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
This section presents EPL reforms in OECD countries between 2019, the year of the previous release of the indicators, and 2025, the latest year in the database.50 It focusses mostly on reforms that affected the indicators, as illustrated in Figure 6.10 and Figure 6.11. Figure 6.10 depicts the changes in the indicators for individual and collective dismissals concerning open-ended contracts (Panel A) and in the indicator for temporary contracts from 2019 to 2025 (Panel B). Figure 6.11 decomposes these changes in terms of the main dimensions of the regulation.
These reforms can be classified into four groups. A first group of reforms made regulation more predictable by harmonising regulation among dismissals of workers on open-ended contracts. A second category of reform concerned hiring regulation for temporary workers and mainly consisted of making regulation more restrictive – only two countries relaxed restrictions between 2019 and 2025 with the aim to mitigate previous or concomitant reforms that significantly limited the opportunities and incentives for firms to use temporary contracts. A third category of reforms aligned certain aspects of the regulation of temporary contracts with that of open-ended contracts. Finally, EU directive 2019/1 152 on transparent and predictable working conditions led to a series of reforms of the probationary period in European countries, although these were minor and mainly limited to fixed-term contracts (more details on this directive are provided in Section 6.4.4 below).
These reforms led to a substantial increase in the overall indicator for open-ended contracts (EPRC) in Austria, New Zealand and Portugal, while they significantly reduced the EPRC only in Greece (Figure 6.11, Panel A). The reforms also led to a significant increase in the indicator for temporary contracts in Australia, Japan, Mexico, Norway and Spain (Panel B). Only Italy and the Netherlands saw a significant decline in the indicator for temporary contracts.
During the period 2019-2025, many countries substantially strengthened regulation of temporary contracts (Figure 6.10 and Figure 6.12, Panel B51), while virtually no country significantly reduced protection for workers on open-ended contracts (Figure 6.10 and Figure 6.12, Panel A).52 This marks a break with the trend toward relaxing dismissal regulations for workers on open-ended contracts, while keeping regulations on temporary contracts approximately unchanged, as observed in many countries over the decade following the 2008‑2009 global financial crisis (Figure 6.10 and Figure 6.12) (OECD, 2020[8]; 2013[7]).
Note: Range of indicator scores: 0‑6 from least to most restrictive. Panel A: OECD indicator of employment protection of regular workers against individual and collective dismissals (EPRC), Version 4. Panel B: OECD overall EPL indicator for temporary contracts (EPT), Version 4. Countries for which the indicator changed between 2019 and 2025 are shown in red.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
Indicator score of countries with changes in the indicator between 2019 and 2025
Note: Range of indicator scores: 0 to 6 from least to most restrictive. Panel A: OECD indicator of employment protection of regular workers against individual and collective dismissals (EPRC), Version 4. Panel B: OECD overall EPL indicator for temporary contracts (EPT), Version 4. All countries with changes in the OECD indicator of protection against dismissals for regular workers (EPRC, Panel A) and the OECD overall indicator for temporary contracts (EPT, Panel B) between 2019 and 2025 are displayed. Panel A: The EPL indicator assigns the same weight to the four broad categories. Panel B: countries are excluded if restrictions on the use of temporary contracts changed solely because dismissal regulations for open-ended contracts changed and dismissal regulations for fixed-term workers are aligned with that applicable to permanent employees; the EPL indicator assigns the same weight to hiring regulation of temporary contracts and termination of fixed-term contracts, with hiring regulation for fixed-term contracts and temporary work agency employment contributing in equal shares to hiring regulation for temporary contracts.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
OECD unweighted average
Note: Range of indicator scores: 0 to 6 from least to most restrictive. The OECD unweighted average is taken across the 32 OECD countries with data available over the whole observation period (not including Colombia, Costa Rica, Iceland, Israel, Latvia and Lithuania). Panel A: OECD indicator of employment protection of regular workers against individual and collective dismissals (EPRC), Version 3. Panel B: OECD overall EPL indicator for temporary contracts (EPT), Version 3.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
6.4.1. Six countries harmonised employment protection for workers on open-ended contracts
Six countries harmonised regulation among dismissals of workers on open-ended contracts, by (i) limiting the discretionary power of courts in the event of dispute (Greece, Sweden and New Zealand), (ii) aligning protection for blue‑collar workers with that for white‑collar workers (Austria and again Greece), (iii) harmonizing the rules for calculating severance pay between different job tenure levels (the Netherlands) or (iv) extending the period between notification of dismissal and actual dismissal, so that workers have more time to contest the validity of the dismissal (e.g. with the Ministry of Labour) before dismissal (Portugal). Reforms in Austria, New Zealand and Portugal led to a substantial increase in the indicator over the period 2019-2025 (Figure 6.10, Panel A), while the indicator declined significantly in Greece.53
Three countries harmonised protection against dismissal by limiting the discretionary power of courts in the event of dispute. In June 2021, Greece introduced a compensation scale for unfair dismissal: at the request of either the employer or the employee, the court may award the employee a compensation ranging from three monthly wages to double the severance payment, instead of reinstating the employee and paying back pay. This led to a significant decrease in the EPL indicator of protection against dismissal for regular workers (EPRC) (Figure 6.10, Panel A). Since October 2022 in Sweden, if an employee files a complaint for unfair dismissal before the date of dismissal, the court can no longer issue a provisional ruling. Until the reform, employers had to wait for the court’s provisional decision to dismiss the employee. This change harmonised and simplified the notification procedure – whether the dismissal concerns an employee on an open-ended contract or an employee on a fixed-term contract before its expiration – but also increased the risk of subsequent complaints for unfair dismissal. As a consequence, the reform led to two moderate and offsetting changes in the indicator for regular workers. In New Zealand, since May 2019, reinstatement must be offered to the employee (whether on a permanent contract or before the end of a fixed-term contract) following unfair dismissal, where possible and reasonable. Prior to the reform, the authority could order reinstatement but was not required to do so. This reform led to a substantial increase in the EPRC.
Two countries strengthened protection for blue‑collar workers against dismissal by aligning certain aspects of EPL applicable to blue‑collar workers with those applicable to white‑collars workers: the notice period in Austria (October 2021) and both the notice period and severance pay in Greece (January 2022). These changes led to a substantial increase in the notice period and severance pay component of the EPL indicators for regular workers in both countries (Figure 6.10, Panel A).
In January 2020, as part of the Balanced Labour Market Act, the Netherlands harmonised the rules for calculating severance payment – also paid in the event of non-renewal of a fixed-term contract – between different job tenure levels, removing the exemption before two years of tenure and a specific restrictive rule applying for tenures longer than 10 years. The reform strengthened the protection of workers with short tenure while reducing that of workers with long tenure, with no overall effect on the indicator (these two aspects of the reform offset each other). This harmonisation effort followed the 2015 Work and Security Act, which made the two available dismissal procedures (via the Public Employment Service or the Sub-district Court) more comparable and determined solely by the reason for termination, rather than by the worker’s choice (OECD, 2020[8]).
In October 2019, Portugal extended the period between notification of dismissal and actual dismissal by five days, so that more workers can adequately prepare for dismissal (e.g. by seeking legal advice or asking the Ministry of Labour to verify the validity of the dismissal). This led to an increase in the indicator for regular workers (Figure 6.10, Panel A).
6.4.2. Reforms of hiring regulation for temporary workers mainly consisted of tightening restrictions
Over the period 2019-2025, seven countries (Australia, Canada, Mexico, Norway, Portugal, Spain and Sweden) strengthened restrictions on the use of temporary employment (whether fixed-term contracts or TWA assignments), resulting in a significant increase in the indicator for temporary workers in about half of them (Australia, Mexico, Norway and Spain) (Figure 6.10, Panel B). By contrast, two countries (Italy and the Netherlands) relaxed restrictions, but did so simultaneously or shortly after implementing reforms going in the opposite direction (i.e. reducing the opportunities and incentives for firms to use temporary contracts).
From March 2022, Spain limited the use of temporary contracts to temporary staff needs (OECD, 2024[57]). More specifically: i) the very flexible and widely used contract for work and service (Contrato por obra o servicio) was abolished; ii) the maximum duration of the two training contracts (contrato de trabajo en prácticas and contrato para la formación y el aprendizaje), of two and three years respectively, was reduced to one year (contrato para la obtención de la práctica profesional) and two years (contrato de formación en alternancia); and iii) the requirements to justify the temporary nature of needs was strengthened. Another important part of the Spanish reform, but one that is not reflected the OECD Employment Protection indicators, is the increased scope for the use of open-ended intermittent contracts (Contrato fijo-discontinuo),54 which provide better job security than temporary contracts, but no legal minimum working hours and therefore uncertain economic security (Box 6.3).
In December 2023, Australia introduced legal limitations on the number and cumulative duration of consecutive fixed-term contracts for the same role, which cannot exceed two contracts and two years respectively.55 In Norway, in July 2022, the possibility for firms to use fixed-term contracts without justification for a maximum period of 12 months – and within the limit of 15% of their workforce – was removed, while the maximum cumulative duration of (standard) fixed-term contracts was reduced from four to three years in January 2024. In Portugal, since October 2019, fixed-term contracts can no longer be used without justification to hire workers looking for their first job, and their maximum cumulative duration is two years instead of three (four years instead of six in the case of contracts of uncertain duration). Sweden also reduced the maximum cumulative duration of the most common fixed-term contracts (Special fixed-term employment or SÄVA) from 24 to 12 months in October 2022,56 alongside the simplification of the notification procedures for dismissal of workers on open-ended contracts discussed above.
Two reforms were aimed exclusively at tightening restrictions on the use of TWA employment. In Mexico TWA employment was banned in April 2023. In Ontario (Canada), since July 2024, owners of temporary work agency need an authorisation to operate, as is the case in six other Canadian provinces and territories (Alberta, British Columbia, Manitoba, Yukon, Nunavut and the Northwest Territories).
On the other hand, only two countries relaxed restrictions on hiring temporary workers. In July 2023, Italy reinstated the possibility, which had been removed in July 2018, of using temporary contracts (fixed-term contracts and TWA assignments) for any technical, organisational or production need for a cumulated duration exceeding 12 months.57 In January 2020, the Netherlands increased the maximum cumulative duration of fixed-term contracts from two to three years, albeit as part of a broader set of reforms aimed at reducing employer’s incentives to use such contracts.58
The reforms implemented in Australia, Mexico, Norway, Portugal and Spain led to a significant increase in the overall indicator of employment protection for temporary workers (EPT) while Canada and Sweden saw only a slight increase in the assessed degree of restriction59 (Figure 6.10, Panel B). In contrast, the EPT declined in Italy and in the Netherlands.60
In addition to restricting the scope for using temporary contracts, the 2022 reform in Spain increased that for the use of open-ended intermittent contracts (Contrato fijo-discontinuo) (OECD, 2024[57]). Whereas before the reform their use was strictly limited to seasonal work, the reform extended its scope to all intermittent activities, temporary agency work, and contract work. Consequently, open-ended intermittent contracts can be used for many of the activities that were previously conducted with temporary contracts. Open-ended intermittent contracts offer stronger job security than temporary contracts, but not necessarily more income security: although working hours are known in advance, the law does not guarantee a minimum amount of activity, which might vary depending on the length of the period of activity and the season, within the limits of the applicable sectoral collective agreement.1 For this reason, the reform attracted a lot of attention as critics of the reform worried that it could simply shift temporary contracts into intermittent employment, without creating permanent jobs that offer good economic security.
Analysis in OECD (2024[57]), however, suggests that the reform was successful in fostering the creation of non-intermittent open-ended contracts. Following the 2022 reform, the incidence of permanent contracts in dependent employment increased from about 74% in Q4 2021 to 84% in Q1 2024 (Figure 6.13). Yet, open-ended intermittent contracts played only a limited role in this surge – less than a fifth of the increase was due to these contracts. Although the incidence of open-ended intermittent contracts doubled over the period, it remained modest in proportion to the total number of jobs – only 5.2% in Q1 2024. Evaluations confirm the role of the reform in these developments (Adrjan, Jessen and Victoria-Lanzon, 2026[49]; International Monetary Fund. European Dept., 2024[67]).
Source: OECD (2024[57]), Reviving Broadly Shared Productivity Growth in Spain, https://doi.org/10.1787/34061b21-en.
The 2022 reform pays considerable attention to promoting transitions from open-ended intermittent contracts to continuous permanent contracts. More specifically it compels companies to inform workers on intermittent contracts and their legal representatives of any vacancies for continuous contracts (OECD, 2024[57]) and let workers on intermittent contracts have priority access to vocational training opportunities in the workplace during periods of inactivity.
1. While the law requires that open-ended intermittent contracts specify in advance the expected period and hours of work, the regulation of a minimum guaranteed number of working hours is left to collective agreements. Only for contractors and subcontractors, the maximum period between two calls is set at 3 months or that established by sectoral collective agreements.
6.4.3. Four countries better aligned regulation of temporary contracts with that of open-ended contracts
Four countries (Australia, Japan, Poland and Portugal) better aligned protection of temporary workers with that of workers on open-ended contracts, resulting in a substantial increase in the EPL indicators for temporary contracts in Australia and Japan (Figure 6.11 Panel B).
In April 2023, Poland strengthened the protection of fixed-term employees by aligning EPL for fixed-term contracts before the end date with that for open-ended contracts. In practice, this reform made it possible to reinstate fixed-term employees, and notification procedures became more burdensome, with employers now required to notify trade unions of dismissals – including of the reasons for them. However, as discussed above (see Box 6.2), the EPL indicators in practice do not take into account dismissal regulations applicable before the end of a fixed-term contract.
In May 2023, Portugal increased severance payment to be paid both before and at the end of a fixed-term contract, from 18 to 24 daily wages per year of job tenure.61 However, as far as indicators are concerned, this change is offset in the termination component of the EPT by the 2019 reform, which, by reducing the maximum contract duration, also reduced the “baseline” duration of a contract,62 and, as a result, the estimated time between the decision to terminate the contract and its effective end date.
Beyond regulation on contract termination, equal treatment between employees and TWA workers can now be required in Australia in terms of pay (since December 2023, as with the additional hiring restrictions mentioned above on fixed-term contracts, and if the labour court issues an order of equal pay at the request of the employee, employee organisation or user firm63),64 and is now mandatory in Japan in terms of pay and non-monetary working conditions (since April 2020 – before April 2020, Japanese TWA agencies were only required to consider the working conditions of employees when setting those of TWA workers). These two reforms led to a substantial increase in the EPL indicators for temporary contracts (Figure 6.10, Panel B).
6.4.4. EU regulation led to slight reduction in the probationary period in some countries, mainly limited to fixed-term contracts
In June 2019, the European Union (EU) introduced a maximum duration of six months for the probationary period – with possible deviations justified by the nature of employment or the interests of the worker. Indeed, according to Article 8 of EU directive 2019/1 152 on transparent and predictable working conditions, “where an employment relationship is subject to a probationary period as defined in national law or practice, that period shall not exceed six months”.
Following the entry into force of the Directive, among OECD EU countries, only Ireland implemented a substantial reduction in the probationary period for workers on open-ended contracts – from 12 to 6 months – in December 2022. In fact, the probationary period was already six months or less in virtually all OECD EU countries. Furthermore, Article 14 of the Directive specifies that the probationary period can remain longer than six months in countries where its duration is set by collective agreements, as is the case, for example, in Denmark (where the probationary period is generally nine months) and France (eight months for white‑collar workers under certain collective agreements).
EU directive 2019/1 152 led more countries to amend regulation on probationary periods specific to fixed-term contracts than to those specific to open-ended contracts, although the changes are not reflected in the indicators.65 Article 8 specifies: “In the case of fixed-term employment relationships, Member States shall ensure that the length of such a probationary period is proportionate to the expected duration of the contract and the nature of the work”. Some countries directly incorporated these obligations into their regulation, leaving some room for interpretation (e.g. Germany, Ireland, Slovenia). On the other hand, five OECD EU counties introduced an explicit link between the length of the probationary period and the length of the contract: a quarter of the contract period up to a maximum of six months in Greece (September 2023), one month (two months respectively) if the contract is less than six months (12 months) in Latvia (August 2022), half the duration of the contract up to a maximum of three months in Lithuania (August 2022), and half the duration of the contract in Norway (July 2024) and the Slovak Republic (November 2022). However, several EU countries (Estonia, Finland, France, the Netherlands and Portugal) had already included such explicit rules on proportionality between the length of the probationary period and the length of the contract in their national regulation before the directive was implemented.
6.4.5. Other policy approaches to labour market dualism
Most of the above reforms could help reduce labour market dualism, by making dismissal regulations for workers on open-ended contracts more predictable and temporary contracts less attractive and more restrictive to use (Section 6.1.3). Beyond the scope of the indicators, other reforms have aimed to limit the use of temporary employment. For example, in September 2022, France introduced a system of experience‑rated unemployment insurance contributions (bonus – malus) in sectors relying most heavily on short-term contracts. Under this system, firms with a separation rate higher than the sectoral average face a higher social security contribution rate, while those with a separation rate below the average face a lower rate. Unemployment insurance contribution rates can indeed be used to create financial incentives for employers and employees to choose more stable employment contracts (OECD, 2020[8]).
Policy actions aimed at addressing labour market dualism also extend beyond open-ended and temporary contracts. For example, in the United Kingdom, from 2027, the Employment Rights Act 2025 will grant workers on variable hour contracts66 the right to guaranteed hours, reasonable notice of shifts, and payments for short-notice cancellation of shifts, with corresponding rights for TWA workers.67Recent years have also seen the emergence of numerous regulations and court rulings aimed at improving the working conditions of self-employed workers on digital labour platforms (Box 6.4), who are particularly vulnerable to “false self-employment” – i.e. being hired as self-employed despite working arrangements similar to those of employees in order to avoid regulations, taxes and unionisation (OECD, 2019[68]).
In recent years, various regulations and case law have aimed at improving the working conditions of platform workers in many OECD countries, as (i) a number of national court decisions have deemed platform workers the status of employee – many jurisdictions have “primacy of facts” principles that allow workers to be classified as employees if they meet minimum standards of dependency and accountability (OECD, 2024[69]) –, and (ii) several countries have implemented minimum standards on the working conditions of platform workers (e.g. on earnings or deactivation procedures).
In several EU countries, courts have tended to consider some type of platform workers as employees (Eurofound, 2024[70]; OECD, 2024[69]). That was for example the case for two 2020 rulings for: (i) food delivery drivers in Spain, as the platform was deemed to determine their working conditions; and (ii) Uber drivers in France, when the platform was considered to determine prices, monitor execution and impose sanctions on drivers, who, in addition, could not independently access clients. However, more recent court decisions in France have been less clear-cut: while a 2025 decision involving Deliveroo reclassified couriers as employees, again due to prescriptive operational guidelines, two rulings refused this reclassification for Uber drivers, considering that the relationship between drivers and Uber does not constitute a subordinate relationship.1, 2 These court decisions were issued in the context of the upcoming implementation of the 2024 EU Platform Work Directive,3 which introduces a presumption of employment when platforms exercise “direction and control” over workers. While the directive should be progressively integrated to national regulations by the end of 2026, some countries have already legislated: in Spain, the 2021 Rider’s law confirmed the employee status of platform workers when platforms exercise direction and control (ETUC, 2022[71]).
In addition, some countries set minimum standards on the working conditions of platform workers. In 2024, Australia created a new jurisdiction within the labour court (the Fair Work Commission) to set minimum standards for “employee‑like” workers in the gig economy, resolving disputes on issues such as unfair deactivation from a digital labour platform, pay floors and insurance coverage.4 In Italy, a 2019 reform extended certain employment and social protection rights of dependent workers to platform workers, including minimum wage (or the right to bargain over wages) and paid leave (Eurofound, 2024[70]). In Ontario (Canada), the Working for Workers Act (2022) provided some core protections to platform workers – such as pay transparency, notice of deactivation and minimum-earning guarantees.5 In the United Kingdom, a 2021 Supreme Court ruling6 deemed that, given Uber’s control over its drivers, Uber drivers fall into the “worker” category – a status that sits between self-employment and employment and that provides a limited set of employment rights, including minimum wage and paid leave. In September 2019, California’s legislature passed Assembly Bill 5 (AB5), which enacted a presumption of employee status essentially applying to most gig workers. Its application to app-based drivers was then repealed by referendum in 2020, although the new law still provides more protection for app-based drivers than for other independent contractors.7
2.https://www.lemonde.fr/economie/article/2025/07/18/vtc-pour-la-premiere-fois-la-cour-de-cassation-refuse-de-requalifier-des-chauffeurs-comme-salaries-d-uber_6622072_3234.html.
4.https://www.dewr.gov.au/download/15647/extend-powers-fair-work-commission-set-minimum-standards-employee-workers/36520/extend-powers-fwc-include-employee-forms-work/pdf.
Employment protection legislation is widely debated. It plays a key role in helping countries navigate fluctuations in demand and structural changes in a fair and effective manner. This chapter details employment protection legislation in OECD countries, drawing on the updated EPL indicators for 2025.
Most EPL reforms implemented since the onset of the COVID‑19 crisis have focussed on harmonising regulation among dismissals of workers on open-ended contracts and strengthening regulation of temporary contracts. This marks a break with the previous trend, when dismissal regulations were often relaxed for workers on open-ended contracts, while keeping regulations on temporary contracts approximately unchanged – an approach followed in many countries over the decade following the 2008‑2009 global financial crisis. The recent reforms, however, could help reduce labour market dualism without weakening regulation, by making dismissal regulation for workers on open-ended contracts more predictable and temporary contracts less attractive and more difficult to use – see also OECD (2014[12]; 2020[8]) for a larger discussion of the effects of this type of reforms on labour market segmentation.
Policy actions aimed at addressing labour market dualism also extend beyond open-ended and temporary contracts. For example, recent years have seen the emergence of regulations and court rulings aimed at improving working conditions for self-employed workers on digital labour platforms and for workers on variable hour contracts.
To make the most of EPL in today’s changing labour markets, it needs to be carefully co‑ordinated with complementary labour market policies. In particular, well-designed unemployment benefits and active labour market policies are essential for employees’ protection and can limit the consequences of job displacement while accelerating the transition to new jobs and activities. Collective bargaining systems also have a role to play in ensuring a balanced distribution of the costs and benefits of labour market transformations between workers and employers.
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Note: Where there are differences by types of dismissal, the scored value is the average of the values for a dismissal for personal and for economic reasons. Where there are differences by firm size, the scored value is the average of the values for a firm with 35, 150 and 350 employees. More details on the structure of the indicators of protection against terminating fixed-term contracts are provided in Box 6.2.
Difference in regulation compared to open-ended contracts for a worker with 9 months of tenure, by broad category of regulation (no difference was found for the category enforcement of unfair dismissal regulation, this category is therefore excluded from the table), 2025
Note: CA: collective agreement. FTC: standard fixed-term contract. UNFD: unfair dismissal.
1. Difficulty of dismissal includes definition of fair and unfair dismissal, compensation and the possibility of reinstatement following unfair dismissal and length of the probationary period.
2. Procedural inconvenience includes notification procedures (e.g. simple notice of dismissal or consultation with a third party) and the delay before the notice period can start.
3. In Canada, there is some variation in regulation across provinces. The table reflects the situation most commonly found in the four biggest provinces: Alberta, British Columbia, Ontario and Quebec.
4. In France, in the case of conversion of the contract into one of indefinite duration, the employer can receive a rebate for the social security contributions paid in excess of the rate for workers on open-ended contracts.
5. In Italy, in the case of conversion of the contract into one of indefinite duration, the employer can receive a rebate for the unemployment insurance contributions paid in excess of the rate for workers on open-ended contracts.
6. In Slovenia, the rate of employers’ unemployment insurance contributions is higher for FTCs than for open-ended contracts. However, if a FTC is converted into an open-ended contract, then the employer is exempted from unemployment insurance contributions for up to two years.
7. In the United States, there are no regulations governing general contractual matters. If parties bargain for, and create, a contract for employment, the contract itself would state any conditions that would restrict termination at or before the end date. If a lawsuit is brought by the worker for breach of contract, the jurisdiction where the court is located may have its own body of case law that would serve as precedent for deciding the outcome of the case. Under certain circumstances an employer’s oral or written assurances regarding job tenure can create an implied contract under which the employer cannot terminate employment without just cause. Only certain states in the United States recognise the “implied contract” exception to at-will employment and states follow their own case law. Court decisions with respect to wrongful termination of an implied relationship claims are made on a case‑by-case basis.
2025, ordered with respect to the indicator for individual dismissals
Note: OECD indicators of employment protection for regular contracts against individual dismissals (EPR), collective dismissals (EPC) and both individual and collective dismissals (EPRC), version 4. Range of indicator scores: 0‑6 from least to most restrictive. The OECD EPL indicators assign the same weight to the four broad categories. Panel C: Each broad category assigns a weight of 5/7 to the same category corresponding to individual dismissals and 2/7 to that corresponding to collective dismissals.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
In months, starting from the date of dismissal, 2025
Note: These values are for individual (not collective) dismissals. They take the average of dismissals for personal and economic reasons. They reflect time limits from the contract termination date, not from notification of dismissal. Costa Rica is excluded as dismissals of workers on open-ended contracts are allowed for any reason, which is not explicitly prohibited (e.g. discrimination or violation of civil right legislation). Values in Colombia and the United States correspond to the specific cases of dismissal for personal reason in Colombia and implied contract in the United States – in the remaining cases, dismissals are allowed for any non-explicitly prohibited reason. In Canada, the value corresponds to the province of Quebec as, in the three other provinces considered in the EPL indicators (i.e. Alberta, Ontario and British Colombia), dismissals are allowed for any non-explicitly prohibited reason.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
2025
Note: The value for collective dismissals is the average of the values corresponding to regulation applying to dismissals of 10, 45 and 120 workers by a firm within one month.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
2025
Note: Mexico is excluded from Panel C, as TWA employment has been banned in Mexico. TWA: temporary work agency.
Source: OECD Employment Protection Legislation Database, https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
← 1. The OECD EPL indicators do not only take into account legislation, but also sectoral collective agreements and case law (OECD, 2020[8]; Söderqvist and Lindberg, 2019[80]; Söderqvist, 2026[87]).
← 2. Iceland and Israel are excluded from the analyses presented in this chapter due to lack of updated data.
← 3. The new data will be available for download at https://www.oecd.org/en/data/datasets/oecd-indicators-of-employment-protection.html.
← 4. Social plans and transition initiatives typically operate through co‑ordinated efforts between employers and worker representatives (and sometimes PES) to reduce the number of dismissals and, particularly, mitigate their negative consequences for workers. Some of these efforts also aim to create structured pathways for displaced workers that can significantly increase their re‑employment chances (OECD, 2024[2]).
← 5. It should be noted that not all types of early intervention are effective. For example, evidence from Germany suggests that caseworker meetings fail to improve jobseekers’ labour market outcomes (Homrighausen and Oberfichtner, 2026[77]), while signing an integration agreement is effective, particularly when combined with the preparation of an action plan (van den Berg, Stephan and Uhlendorff, 2025[81]).
← 6. Mandatory retirement can also result in the legal obligation to terminate the employment relationship at a certain age, generally among civil servants or specific occupations that raise health and safety concerns (OECD, 2022[30]).
← 7. Mandatory retirement is often used to circumvent strict employment and wage regulations, especially where seniority-based pay leads to a mismatch between wages and productivity or where dismissing underperforming workers is difficult.
← 8. Most OECD countries offer stricter dismissal regulation for older workers (until mandatory retirement age when there is one). While in a few OECD countries regulation depends directly on age, it is far more common for dismissal regulations to increase with tenure – often correlated with age: notice period and severance pay are increasing with tenure in almost all OECD countries (OECD, 2020[8]). In the absence of portability of severance pay entitlements, tenure‑increasing EPL should not translate into lower hiring rates or higher exposure to temporary employment for older workers.
← 9. Where dismissal regulations increase with tenure, mid-career and older workers may hesitate to leave long-held positions due to the risk of losing accumulated severance entitlements, which can be partly solved by increasing the portability severance pay entitlements (Kettemann, Kramarz and Zweimmller, 2017[76]).
← 10. Empirical studies highlighting a negative impact of dismissal regulation on job and worker flows include Autor, Donohue and Schwab (2006[72]), Bassanini and Garnero (2013[79]), Boeri and Jimeno (2005[83]), Bottasso, Conti and Sulis (2017[82]), Gielen and Tatsiramos (2012[85]), Haltiwanger, Scarpetta and Schweiger (2014[73]), Marinescu (2009[84]), Micco and Pagés (2006[74]), Millán et al. (2013[75]), and OECD (2010[86]).
← 11. Employment effects are discussed in Cahuc et al. (2023[55]) and OECD (2024[57]), positive impacts on the incidence of open-ended contracts are highlighted in Adrjan, Jessen and Victoria-Lanzon (2026[49]), Grasso and Tatsiramos (2023[56]) and OECD (2024[57]).
← 12. For Italy and Spain, this is consistent with evaluations of earlier opposite reforms liberalising temporary employment in these countries (Daruich, Di Addario and Saggio, 2023[52]; García-Pérez, Marinescu and Vall Castello, 2018[54]).
← 13. Beyond labour market dualism, event study analysis suggests that hiring regulation for temporary workers also influence the type of technology adopted by firms, encouraging them to shift their innovation efforts toward labour-saving processes rather than the introduction of new products (Manera and Uccioli, 2021[78]).
← 14. Some regulatory frameworks are also harder to circumvent than others. For example, limits on the number and duration of successive contracts are harder to circumvent when they apply at the firm level rather than within a given establishment or position.
← 15. The nature of the indicators, which convert mostly qualitative information into numerical data, means that readers should be cautious when interpreting small differences in scores across countries and over time.
← 16. Each of these four components are defined from lower-level elements presented in detail in Annex 3.A. in OECD (2020[8]).
← 17. See https://eplex.ilo.org/en/valid-and-prohibited-grounds-for-dismissal for a list of prohibited grounds for dismissal by country.
← 18. In contrast to individual dismissals, collective dismissals can only occur for economic reasons. Therefore, while the indicators for individual dismissals give the same weight to dismissals for personal and economic reasons, in the aggregate indicators dismissals for economic reasons take a weight of almost two‑thirds.
← 19. Besides legislation, the OECD indicators quantify also actual practices, by considering court rulings and collective bargaining agreements (national and sectoral, but not firm level). They focus on the private, not public, sector and evaluate regulation applying to medium-sized and large, not small, firms and their employees. Where there are differences by firm size, the scored value is the average of the values for a firm with 35, 150 and 350 employees. Where there are differences between categories of workers (for example blue‑collar and white‑collar workers), the scored value is the average of the values corresponding to each category. Where there are differences between dismissals for personal and for economic reasons, the scored value is the average of the two. When the reason for dismissal cannot be challenged in court (except for explicitly prohibited grounds), the scores of the subcomponents in the broad categories regulatory framework for unfair dismissals and enforcement of unfair dismissal regulation are systematically taken equal to zero, except those on obligations and selection criteria (see Annex 3.A in OECD (2020[8]) for more details on the subcomponents). When the reason for dismissal cannot be challenged under certain procedures, contracts, or types of dismissals (i.e. for economic or personal reasons) only, the score of these subcomponents is equal to half that corresponding to the cases where the reason for dismissal can be challenged.
← 20. In the United States, the indicators take into account differences across states (although differences are small); in Canada, the indicators take into account differences across provinces and territories.
← 21. In the United States, the time to make a claim of unfair dismissal depends on the state jurisdiction, but it is typically very long in case restrictions to dismissals exist in the contract or “implied contract”, in which the employer gives certain assurances for continued employment to create a contract of sorts (despite no formal contract). It is for example four years in California and Texas and six years in New York.
← 22. The maximum time to make a claim for each country is shown in Annex Figure 6.A.2.
← 23. The length of the probationary period enters only the employment protection indicator for individual dismissals and not the indicator for collective dismissals, as probationary periods are always associated with an individual worker and, in principle, individual performance.
← 24. More precisely, the indicator for collective dismissals scores the average of the values corresponding to regulation applying to dismissals of 10, 45 and 120 workers by a firm within one month (OECD, 2020[8]). As mentioned in note 15, where there are differences by firm size, the scored value is the average of the values for a firm with 35, 150 and 350 employees. The indicator for collective dismissals is based on the average of the three firm sizes for 10 dismissals, the two larger firm sizes for 45 dismissals and the largest firm size for 120 dismissals. By construction, the higher is the dismissal threshold for specific regulations to apply, the lower (higher) is the weight of mass dismissal (individual dismissal for economic reasons) regulations in the indicator of collective dismissals, and the higher (the lower) is the difference between the indicator for mass dismissals (individual dismissal) and that for collective dismissals.
← 25. In some countries specific regulations apply as of 10 dismissed workers or lower; in others they start only when the number of involved workers is greater.
← 26. As 120 workers exceeds the dismissal threshold in all countries with specific legislation for collective dismissals (but not 10 and 45 workers), the regulatory differences between individual and mass dismissals enter the indicator for collective dismissals with a minimum weight of around one‑third (depending on whether this threshold is also lower than 45 or 10 dismissals).
← 27. To allow a comparison between the level of protection for individual dismissals and that for collective dismissals, the indicator for individual dismissals for economic reasons takes into account the same elements of regulation as in the indicator for collective dismissals, i.e. the same elements as in the indicator for individual dismissals with the exception of the length of the probationary period (see note 19).
← 28. There is no difference between the specific regulations applying to the dismissal of 10, 45 and 120 workers in these countries.
← 29. While additional notifications are required in Israel (to the Employment Service Bureau) and Korea (to the Ministry of Labour), they do not impose significant additional constraints on firms and hence are not reflected in the indicators.
← 30. Nevertheless, pooling several individual layoffs in one collective dismissal can, in some cases, reduce the administrative burden of the firm. This is not considered in the EPL indicators.
← 31. Some countries require a consultation or an authorisation in specific cases only. In Germany, if the works council objects to the dismissal and the employee files a complaint challenging it, the employer is required, at the employee’s request, to keep the employee on the job after the notice period has expired, until a final decision is rendered in the case. In Latvia (respectively Poland), a dismissal of a union member requires an approval by (respectively a consultation with) the trade union. In Norway, a consultation with employee representatives is required, except if the employee refuses it.
← 32. Annex Figure 6.A.3 displays the time delay before notice by country.
← 33. In Belgium, the time limit for making a claim of unfair dismissal is one year after an individual dismissal, while the employee may individually contest compliance with the information and consultation procedure up to 30 days after a mass dismissal. In France, any claim related to the termination of the employment contract must be filed within 12 months from the date of notification of the termination in the event of individual dismissal, while, in the event of mass dismissals in firms with 50 employees or more, the homologation by the DREETS can be challenged until two months after dismissal. In addition, the homologation by the DREETS reduces the risks associated with future unfair dismissal complaints. Similarly, in the event of a mass dismissal in Greece, an administrative approval reduces the risk associated with future complaints (although the mass dismissal can take place in its absence). In most states in the United States, employees who voluntarily quit without good cause are not eligible for unemployment benefits, although employees who accept a voluntary separation package in a situation where an insufficient number of workers take such voluntary separation packages may be eligible for unemployment compensation under specific circumstances. In Switzerland, the maximum compensation for unfair dismissal is six months in the event of individual dismissal, against two months to challenge the respect of the procedure in the event of a mass dismissal.
← 34. Quebec is the only Canadian province, which operates under a civil law system, while the other provinces and territories operate under a common law system (Morin, 2022[88]).
← 35. Temporary work agency assignments are the result of tripartite relationships characterised by an employment contract between the worker and the agency and a commercial contract between the agency and the user firm that places the worker under the direct supervision of the user firm.
← 36. The termination rules of temporary work agency assignments are subject to commercial contract regulation, which is out of the scope of the EPL indicators. In addition, the termination costs of temporary work agency contracts are paid by the temporary work agency, which invoices them to the user firm together with the other costs. Therefore, these are not one‑time termination costs paid by the user firm at the end of the employment relationship.
← 37. This corresponds to the sum of items 5b (for economic reasons) and 5d (for personal reasons) (Annex Table 6.A.1). Other components of item 5, degrees of freedom of the judges (item 5a) and selection criteria (item 5c), are always equal to zero in the EPTT.
← 38. The ad hoc indicator of protection of regular workers against individual dismissals is made of the sub-components of the original EPR aggregated using the same weights as those used to construct the EPTT (see columns (2) of Table 6.1), except that the sub-component compensation following unfair dismissals is assessed at 9 months of tenure instead of 20 years. The United Kingdom is a particular case, as the probationary period is longer than 9 months. This means that workers (whether on permanent or fixed-term contracts) are not eligible for protection against unfair dismissal at 9 months of tenure. The sub-components notification procedures, as well as all items in the categories regulatory framework for unfair dismissal and enforcement of unfair dismissal regulations (i.e. items 5, 6, 7, 8, 9, 22, 23 and 24) are therefore equal to zero in the ad hoc EPR, since, like the EPTT, this indicator should assess the level of protection that applies at 9 months of tenure. This is not the case for the same components of the original EPR, which are assessed after the probationary period, as is the general rule for the EPR.
← 39. In many countries, additional restrictions may arise when the employer has violated the regulation on the maximum number of renewals of fixed-term contracts: in that case, judicial practices often consider the contract as a permanent contract. This case is considered to fall under the indicators for regular workers and is not considered in the EPTT.
← 40. The EPTT reflects the level of protection that applies at 9 months of tenure. Additional restrictions would be visible at longer tenure, such as in the United Kingdom, where all workers are covered by unfair dismissal rules if they have at least two year’s tenure (including workers at the end of a fixed-term contract), or in Norway and Lithuania, where notification procedures, notice period and/or severance payment apply from certain tenure levels (see Annex Table 6.A.2 for more details).
← 41. In Sweden, the cumulative duration of fixed-term contracts is assumed to be less than 12 months over a three‑year period, so no notice period is required and there is no priority for re‑hiring.
← 42. Nine months is shorter than the probationary period in the United Kingdom.
← 43. The cumulated duration of fixed-term contracts can last up to five years in Costa Rica. The wages corresponding to the remaining contract period should also be paid to the worker in the event of dismissal before the end of the contract.
← 44. At most, a simple written notification is required in some of these countries (see Annex Table 6.A.2), which is not considered in the indicators (see Annex Table 6.A.1).
← 45. It should be noted that Latvia has among the lowest shares of employees on a fixed-term contract (2.4% in 2024 against 11% in the OECD on average), which suggests that the degree of regulatory dualism embodied in contract termination regulation is not necessarily the main determinant of the actual dualism of the labour market.
← 46. Portugal has the highest EPTT, as regulation also involves a 15 days’ notice period and priority for hiring on permanent contracts.
← 47. The maximum number and duration of successive fixed-term contracts by county are shown in Annex Figure 6.A.4, Panels A and B.
← 48. However, there is evidence that TWA regulations are particularly poorly enforced in Belgium (Bosmans, De Moortel and Vanroelen, 2021[58]).
← 49. The maximum duration of successive TWA assignments by county is shown in Annex Figure 6.A.4, Panel C.
← 51. Figure 6.12 uses version 3 of the EPL indicators, as the time‑series of version 4 are not available before 2013. Compared to version 4, version 3 of the indicator for open-ended contracts does not take into account enforcement of unfair dismissal regulations and treats the regulation for collective dismissals differently (OECD, 2020[8]), while version 3 of the indicator for fixed-term contracts does not account for regulations on the termination of fixed-term contracts (Section 6.3.1).
← 52. The spike in the EPRC indicator in 2021 (Panel A) is due to the ban on dismissals in Italy and Türkiye (only for economic reasons, both individual and collective, in Italy) that was implemented following the COVID‑19 pandemic.
← 53. In Canada, since February 2024, federal law requires to provide a notice period for individual dismissal that increases with tenure (from two to eight weeks, instead of two weeks for all workers with more than three months’ tenure). However, the EPL indicators exclude federal regulations, which covers only 6% of the Canadian workforce. More specifically, the indicators reflect regulations of the four largest provinces (Alberta, British Columbia, Ontario and Quebec), covering 81% of paid employment.
← 54. Whereas before the reform their use was strictly limited to seasonal work, the reform extended its scope to all intermittent activities, temporary agency work, and contract work. Consequently, open-ended intermittent contracts can be used for many of the activities that were previously conducted with temporary contracts.
← 55. Fixed-term employment plays a minor role in Australia, where firms find flexibility mostly by relying on casual contracts, according to which the employment relationship is defined on an hourly or daily basis.
← 56. Sectoral agreements for white‑collar workers usually allow for an extended maximum duration for successive fixed-term contracts, which remained generally unchanged following the reform (Söderqvist, 2026[87]).
← 57. The 2018 reform put no restriction on the use of fixed-term contracts for 12 months or less. This case was taken as a reference for the coding of the indicators for Italy (since more favourable for firms), hence the absence of change between 2019 and 2025 in the fixed-term contracts component of the indicator (Figure 6.11, Panel B).
← 58. Beyond the harmonisation of severance payment discussed above, the Balanced Labour Market Act increased the employer’s unemployment insurance contribution rate for fixed-term contracts and eased dismissals of regular workers. Employers can now combine personal reasons for dismissal that are by themselves insufficient to justify a dismissal, but the EPL indicators do not capture such possible combinations of insufficient grounds.
← 59. The change in the EPT is very small in Canada, where the reform was limited to the province of Ontario; and in Sweden, where most white‑collar workers were not affected by the reform due to collective agreements (see Endnote 54).
← 60. Changes to the maximum cumulative duration of fixed-term contracts in the Netherlands, Portugal and Spain not only affected the components of the indicators related to hiring regulations. By changing the “baseline” duration of a contract (see Box 6.1) – and thus the period between the employer’s decision to terminate the employment relationship and the actual end of the contract – they also had the opposite effect on the component of the indicator corresponding to the termination of fixed-term contracts.
← 61. Portugal also slightly increased severance payments specific to collective dismissals from 12 to 14 days of wage per year of job tenure, but the change is too small to be captured by the indicators for regular workers.
← 62. The “baseline” duration of a contract, as defined for the indicator, is. the maximum cumulative duration divided by the maximum number of successive contracts (Box 6.1).
← 63. Orders made by the labour court (Fair Work Commission) could not take effect before 1 November 2024.
← 64. These provisions do not apply for firms with fewer than 15 employees or working arrangements of 3 months or less.
← 65. As discussed in Section 6.3.1, in all countries, the EPTT codes regulations according to which all contract terminations are fair (except those for explicitly prohibited grounds), generally corresponding to the situation where the employer decides to wait until the end of the fixed-term contract. The score of the component corresponding to the probationary period (i.e. the period during which the employee is not protected against unfair dismissal) is therefore always equal to zero. In addition, cases of termination of the contract during the probationary period are not relevant to the indicators, as the probationary period only applies to the first contract, not to renewals.
← 66. Many countries have specific forms of non-standard employment allowing hours worked to vary from one week to the next, sometimes without a minimum number of guaranteed hours. Some examples include casual workers in Australia, on-call contracts (lavoro a chiamata o intermittente) in Italy, min-max contracts and zero-hour contracts in the Netherlands, on-call contracts in New Zealand, zero-hour work in the United Kingdom, and if-and-when contracts and zero-hour contracts in Ireland.