Employment protection legislation—the set of laws governing the initiation of open-ended and temporary contracts, as well as the termination of contractual relationships, both individually or collectively—has been at the centre of debates on labour market reforms. Nevertheless, the very existence of legal provisions often does not tell much about how strict regulations are in a given country, nor the degree of protection afforded to workers, which will also depend on complementary policies such as income support for the unemployed. A well-functioning EPL - which balances the need to provide fair treatment as well as income security to workers and allow firms’ to adjust employment (hours or jobs) based on fluctuations in aggregate demand - is an important determinant of an economy’s resilience to economic shocks. Together with unemployment benefit systems, employment protection legislation forms a basis for an overall worker security. In times of economic downturns, employment security may also be afforded by other means, such as work-sharing.
While the challenge of flexibility continues to act as a powerful driver for change in European labour markets, many countries are experiencing an increasing dualism or segmentation between workers with stable employment relationships and those with temporary contracts.