Publication: Non-performance of the Severance Pay Program in Slovenia
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Published
2009
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1846887X
Date
2012-03-30
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Combining information from the Firm Survey of Labor Costs with the information about claims filed with the Guarantee Fund by workers whose employers defaulted on their severance pay obligations, the paper analyzes the so-called non-performance problem of severance pay--the fact that coverage, and thus legal entitlement, does not guarantee the actual receipt of the benefit--as experienced in Slovenia in 2000. The findings are threefold: (i) one-third of total obligations incurred by firms failed to be honored and only a small portion of defaulted severance pay claims were reimbursed by the Guarantee Fund; (ii) while both men and women seem to be equally affected, workers older than 40 were disproportionally represented among those whose severance pay claims failed to be honored; and, (iii) among firms that incurred severance pay liabilities, larger and more productive firms were more likely to observe their fiduciary obligations and pay them out. These findings corroborate the weaknesses of severance pay as an income protection program, pointing to the large scale of the non-performance problem and the inequities created by it.
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Publication Severance Pay Programs around the World(World Bank, Washington, DC, 2011-05-22)The paper examines severance pay programs around the world by providing the first ever overview of existing programs, examining their historic development, assessing their economic rationale and describing current reform attempts. While a significant part of the paper is devoted to a comprehensive 183 cross country review of existing severance arrangements and their characteristics, the paper goes beyond a mere description. It develops and empirically tests three hypotheses about the economic rationale of the program, namely severance pay being: (i) a primitive income protection program, (ii) an efficiency enhancing human resource instrument, and (iii) a job protection instrument. The paper also reviews the recent reforms of Austria, Chile, Italy, and Korea.Publication Reforming Severance Pay : An International Perspective(World Bank, 2012)Throughout the developed and developing world there is growing demand for policies that would facilitate access to jobs by the most vulnerable, improve their earnings, and reduce their dependency on public support. As a result, governments are increasingly focused on removing obstacles faced by employers to create jobs and on instilling incentives for individuals to re-enter the labor market or to move toward more productive employment possibilities. Severance pay a program compensating formal workers for dismissal by employers or with an end-of-service benefit is often blamed for distorting employer hiring and firing decisions. Together with restrictive labor market regulations and other formal labor market features, this program is held responsible for excessive job protection with a negative impact on labor market outcomes, in particular affecting the most vulnerable. Despite this strong negative assessment among many labor market economists, surprisingly little is known about this program that exists in most countries around the world as a legally mandated benefit. This lack of knowledge may derive from the special 'positioning' of the program between labor code and social insurance; its origins were in the first policy domain, but its objectives for key programs were replicated in the second domain in particular unemployment and retirement benefits. This is the first-ever book to shed light on this program in a comprehensive manner its historical origins, its rationale, and its characteristics across the world. It reviews the soundness of the empirical accusation, assesses recent country reforms, and offers policy reform alternatives and policy guidance. The policy directions include folding severance pay into existing social insurance programs, where they exist, and to make severance pay contractual between market partners as a way to enhance efficiency in a knowledge-based economy. Folding severance pay into employment benefits may also be an opportunity to move away from unemployment insurance, which is fraught by moral hazard, toward a promising 'hybrid' system of unemployment insurance savings accounts supplemented by social pooling.Publication Choosing a System of Unemployment Income Support : Guidelines for Developing and Transition Countries(Oxford University Press on behalf of the World Bank, 2006-02-14)Mounting evidence suggests that excessive job protection reduces employment and labor market flows, hinders technological innovations, pushes workers into the informal sector, and hurts vulnerable groups by depriving them of job opportunities. Flexible labor markets stimulate job creation, investment, and growth, but they create job insecurity and displace some workers. How can the costs of such insecurity and displacements be minimized while ensuring that the labor market remains flexible? Each of the main unemployment income support systems (unemployment insurance, unemployment assistance, unemployment insurance savings accounts, severance pay, and public works) has strengths and weaknesses. Country-specific conditions, chief among them labor market and other institutions, the capacity to administer each type of system, and the size of the informal sector, determine which system is best suited to developing and transition countries.Publication Severance Pay Compliance in Indonesia(2012-01-01)This paper contributes new evidence from two large household surveys on the compliance of firms with severance pay regulations in Indonesia, and the extent to which changes in severance pay regulations could affect employment rigidity. Compliance appears to be low, as only one-third of workers entitled to severance pay report receiving it, and on average workers only collect 40 percent of the payment due to them. Eligible female and low-wage workers are least likely to report receiving payments. Widespread non-compliance is consistent with trends in employment rigidity, which remained essentially unchanged following the large increases in severance mandated by the 2003 law. These results suggest that workers may benefit from a compromise that relaxes severance pay regulations while improving enforcement of severance pay statutes, and possibly establishing a system of unemployment benefits.Publication The Gender Implications of Public Sector Downsizing : The Reform Program of Vietnam(World Bank, 2002-09-01)Using data from Vietnam, this article describes several types of analysis that can be conducted before launching a major downsizing operation to identify possible gender effects. It draws several conclusions about Vietnam s downsizing reforms. First, although women s prospects of obtaining salaried jobs following displacement from state-owned enterprise worsened as a result of recent reforms, they are likely to improve in the near future. Second, reforms are associated with a sharp decline in the gender gap in earnings, both in and outside the state sector. Third, overstaffing is greatest in sectors in which most employees are men, such as construction, mining, and transportation; it is much less prevalent in sectors in which women dominate the work force, such as footwear, textiles, and garments. Fourth, training, and assistance programs to help redundant workers reveal no evidence of strong gender bias. Fifth, severance packages based on a multiple of earnings are more favorable to men, whereas lump sum packages favor women.
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