Balancing Regulations to Promote Jobs from Employment Contracts to Unemployment Benefits

The report suggests that there are general principles that can guide the design of labor regulations. For instance, in terms of employment contracts, it is important to ensure convergence in the types of benefits and protections that workers receive, regardless of the length of time they spend with a given employer. For minimum wages, it is necessary to keep regulations simple and transparent, and to reduce discretion by having an independent body that periodically assesses the level of the minimum wage and its economic and social impacts. Regarding dismissal procedures, the report recommends giving flexibility to firms in the management of human resources, as long as there is appropriate advance notice, an adequate system of income protection, and efficient mechanisms to detect and sanction discrimination. Finally, for severance pay, the recommendation is to rely more on unemployment benefit systems that reduce employees’ risk of not receiving payments if their employers face liquidity constraints or go out of businesses. The report is organized into four chapters. Chapter one discusses essential elements of the employment contract as well as emerging forms of contractual relationships, with the focus on temporary employment and part-time employment contracts. Chapter two examines the establishment of the minimum wage, including setting the minimum wage, the level and differentiation of minimum wages, coverage, and adjustments in the level. Chapter three presents the main rules and regulations regarding the termination of employment contracts. Chapter four presents a discussion on the design and implementation of income protection schemes in case of unemployment, focusing on severance pay and unemployment benefit schemes.