Deloitte Legal 2018 exclusive study: A global look at dismissal costs and issues

The survey begins with six cost comparisons, which reflects the dismissal cost in all participating countries. The survey data represents three separate cases with different seniority and remuneration packages―as well as examining the difference between a voluntary and involuntary dismissal circumstances in each of these scenarios.

The survey covers the country specific dismissal rules of 45 countries and the compliance formalities required in the upcoming legislative changes.

New 2018 study noteworthy additions:

• Two new comparative tables bringing more insight to overall cost implications
• Expansion that includes the Latin America and Asia Pacific regions
• Sixteen new countries, including: Albania, Bosnia and Herzegovina, Brazil, China, Colombia, Cyprus, Ecuador, Japan, Kazakhstan, Montenegro, Myanmar, Serbia, Singapore, South Korea, Thailand, Vietnam

Key highlights from the research:

• A number of countries, i.e. France, Italy, and the Netherlands have reformed their dismissal legislation in order to increase labor flexibility and/or financial predictability of dismissal cost.
• In over 75% of the surveyed countries, the employer is free to dismiss an employee, but the employee may be reinstated by the courts if the reasons for dismissals are deemed unjustified. Upfront approval is only required in two of the surveyed countries, the Netherlands and Ecuador. In only a limited number of countries, the employer has absolute power to dismiss without any possibility of reinstatement.
• 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.
• Basic dismissal concepts such as dismissal for serious cause and protection against dismissal of certain categories of employees (e.g. maternity, educational leave, political mandate, etc.) are present in almost all countries.
• In some countries, termination is only possible for the reasons stipulated explicitly by law, in which case no (or only minimal) indemnities and/or notice periods are due.
• If we compare all scenarios for dismissal with an objective individual reason or economic reason, we see that the dismissal cost varies widely between legislations, without any geographical preference.
• If we compare all scenarios for dismissal without any objective reason, employers in certain European countries encounter the highest costs, even though huge regional variations continue to exist.
• The highest increase in 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.
• A limited comparison for Latin American and Asian participants―with this baseline sample it is difficult to compare the regions and draw general conclusions.