The ILO study, WHAT WORKS series, Brief no. 7 on temporary employment, shows that regulation of temporary employment does affect firms’ decisions regarding the hiring of temporary labour, but that its effects differ depending on the type of firm. Legislation prohibiting the use of temporary contracts for permanent tasks (note: as is the case of the Czech republic, view the infographic below) has a statistically significant negative influence on the use of temporary labour among all types of firms. In contrast, for intensive users, regulations allowing unlimited use of temporary labour and regulations allowing for longer probationary periods are also important, suggesting that such firms strategically take advantage of these regulations to maintain their high levels of temporary labour. At the same time, regulations on the termination of permanent contracts do not seem to affect the practices of intensive users. For moderate users, regulations on terminating permanent contracts – including specific legislation on severance pay or grounds for redress – are correlated with higher use of temporary labour. However, these firms disregard regulations that allow unlimited use of temporary labour when choosing whether to employ any temporary labour – most likely because they have no intention of taking advantage of these regulations and using temporary labour indefinitely. Interestingly, longer probationary periods do not spark more use of temporary labour by moderate users; if anything, they lead to lower use of temporary labour, possibly because the contracts are quickly converted into permanent contracts when genuinely used for probationary purposes, the study says.
From a policy perspective, these findings not only improve policymakers’ understanding of business constraints, but also demonstrate how legislation can be used to modify business practices. The findings are also important in light of proposed regulatory reforms affecting both permanent and temporary contracts, because they indicate that the impacts of some reforms would be different for different types of firm. For example, changes to the regulation of permanent contracts would probably do little to curb the use of temporary labour by firms that have already built this practice into their production processes. In contrast, there may be merits in policies that are specifically targeted at intensive users of temporary labour, especially if there is evidence of abuse of the practice, the study suggests.
Source: International Labour Organization
View also recently published infographic data on wage trends in the EU.
Komerční banka adds that the newest data by the Statistical Office of the Czech Republic confirmed that corporations’ profit margins have been declining as businesses are forced to offer higher wages at their expense.
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