The International Dismissal Survey 2018
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.
Deloitte Legal has announced the results of the fourth international dismissal study. This study examines procedures of employment termination upon initiative of the employer in 45 countries and provides the employers with a forecast of potential dismissal costs.
During the study, the employee dismissal costs were calculated on the basis of 3 different scenarios in order to cover as many cost determining factors as possible, for instance, seniority of employee, salary and etc. The comparable amounts of dismissal costs were obtained by adding the following amounts: salary paid to employee during the notice period, severance payment, social charges and other payments.
This study might help company managers to better evaluate potential dismissal costs, recognize important aspects and make justified recruitment decisions.
According to the study, after 1 July 2017, the date of when the Labor Code came into force, Lithuania is no longer considered as one of the countries where employers incur the highest employment termination costs. For instance, termination of employment due to objective reasons with an employee who has been with the company for 4 years, receives a base annual salary of 30 000 EUR, a variable annual payment of 2 500 EUR and 4 000 EUR annual bonus would cost to Lithuanian employer over 11 000 EUR. By comparison, analogous dismissal in Italy would cost to an employer over 50 000 EUR, in Belgium – more than 20 000 EUR, in France – more than 18 000 EUR. This leads to believe that costs of employee termination in Lithuania are not drastically high. On the other hand, dismissal from work under the afore-mentioned circumstances in Malta, Germany or neighboring Latvia would cost about half of the Lithuanian “price”. Lower dismissal costs are also common in many other European Union countries such as Hungary, Finland, Greece, Spain, United Kingdom and others. Thus, comparing to the most EU countries, Lithuanian employers still incur rather high costs when it comes to termination of employment without the fault of an employee. Evaluation of different scenarios and countries showed that Lithuania is the 22nd most expensive country out of 35 in cases of employment termination without the fault of an employee and 20th most expensive country out of 30 in cases of employment termination based on employer’s will.
It is worth noting that dismissal costs in Lithuania have significantly decreased after the new Labor Code came into force. Based on analogous study conducted by Deloitte in 2015, dismissal under the above-described scenario would have costed about 200 000 EUR, which is almost twice as much as now. Shorter notice periods and lower severance payments set in the new Labor Code are the main reasons for such change in the dismissal costs. For example, based on the provisions of the old Labor Code, in the above-discussed situation the employer would be required to notify the employee on dismissal at least 2 months prior the dismissal and to pay a severance payment amounting to employee’s 3 average monthly salaries. Whereas, under the new Labor Code notice period in the above situation is one month and severance payment amounts to 2 average monthly salaries. Based on the above, it can be concluded that the new Labor Code improved the situation for Lithuanian employers in the field of dismissal, however, legal framework in many analyzed countries, including most of the EU Member States, is still more flexible.
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