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The International Dismissal Survey
Employment law regulations in 45 countries
The fourth edition of the International Dismissal Survey details dismissal legislation, and provides dismissal cost projections from an employer’s perspective, in 45 countries. The survey for the first time includes countries from Latin America and the Asia-Pasific region.
Some of the 2018 survey’s key findings include:
- Belgium remains after Italy the country where dismissal costs are highest for employers in case of a dismissal with objective reason. Sweden, Brazil and Thailand complete the top five. Italy is the most expensive country after Sweden, Slovakia, Luxembourg and Ireland in case of a dismissal without objective reason.
- In almost all surveyed countries, seniority (the length of service within a certain company) is the key factor in determining the level of dismissal cost. However, over 60% of all participating countries have capped either the notice period or the severance indemnity or both.
- Several systems of dismissal exist: about 40% of the countries attribute only a notice period or an indemnity in lieu of notice, whilst 50% grant both a notice period (or garden leave) and a severance indemnity. 10% only grant a severance indemnity.
- In most countries, the legal grounds for an employer to dismiss employees are restricted and subject to strict formalities. In case of unlawful dismissal, the courts can reinstate an employee. Only in a limited number of countries such as Belgium, Denmark, Finland, Hungary, Luxembourg, Montenegro, Myanmar, Sweden, Switzerland and Vietnam, the courts cannot reinstate the employee and may only determine the indemnity.
- The computation base for the ‘indemnity in lieu of notice’, where applicable, includes in more than 50% of the surveyed countries the total remuneration package (annual base, variable salary and benefits in kind), whereas for the calculation of the ‘severance indemnity’ only 40% of the countries take into account the entire remuneration package. In a limited number of countries, only the base annual salary is taken into account (e.g. Bulgaria, Italy, Portugal, Singapore, UK).
- The highest increase of dismissal cost is triggered by the severance indemnity or indemnity for unlawful dismissal which is due if an employee is dismissed without an objective reason. On average, the cost factor associated with such a dismissal is at least one and a half times the cost for dismissal with objective reason. However, there are important discrepancies per country. For example, in Ireland the cost factor for the employer can reach 10, while other countries (Greece, Austria, Bosnia and Herzegovina, Vietnam, Thailand for instance) do not appear to be familiar with the concept of unlawful dismissal. In these countries, employers do not incur a higher cost in case of dismissal without objective reason. Finally, a limited number of countries were not in a position to provide a cost assessment because the cost for the employer varies depending on the Court’s court’s decision (Malta) or dismissal without reasons is not possible according to their legislation (Kazakhstan, Latvia, Croatia, Slovenia and the Netherlands).
- In about half of the surveyed countries, managing directors do not fall under the compulsory labour rules and parties are free to negotiate dismissal arrangements subject to local corporate governance rules, where applicable.