Reforming Severance Pay : An International Perspective

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 incr...

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Bibliographic Details
Main Authors:	Holzmann, Robert, Vodopivec, Milan
Format:	Publication
Language:	English
Published:	World Bank 2012
Subjects:	ACCOUNTING ADDITIONAL INCOME ADEQUATE INCOME ADMINISTRATIVE COSTS ADVERSE EFFECTS AFFECTED WORKERS AMOUNT OF CONTRIBUTIONS ANNUAL INTEREST RATE ANNUAL RETURNS ANNUAL SALARY AVERAGE BALANCE AVERAGE INTEREST AVERAGE INTEREST RATE AVERAGE WAGE BANK LENDING BANKING SYSTEM BANKRUPTCY BANKS BARGAINING AGREEMENT BENEFICIARIES BUSINESS CYCLE CALCULATION CAPITAL ACCUMULATION CAPITAL INVESTMENTS CASH TRANSFER CASH TRANSFERS CHILD LABOR COLLECTIVE BARGAINING COMMUNITY DEVELOPMENT COMPANY PENSION CONTRACT LABOR CREDIT UNIONS CREDITS CUSTOMER SERVICES DEBTS DEPOSIT DEPOSITS DEVELOPMENT BANK DEVELOPMENT ECONOMICS DISABILITIES DISABILITY DISABILITY INSURANCE DISMISSAL DISPLACEMENT DOMESTIC WORKERS EARNINGS EARNINGS-RELATED PENSION ECONOMIC DOWNTURNS ECONOMIC SHOCKS EMPLOYEE EMPLOYER EMPLOYER CONTRIBUTION EMPLOYER CONTRIBUTIONS EMPLOYERS EMPLOYMENT OPPORTUNITIES EXPENDITURES FAMILY MEMBER FINANCES FINANCIAL DIFFICULTIES FINANCIAL INSTITUTIONS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL SUSTAINABILITY FIRING COST FIRING COSTS FIRM SIZE FLEXIBLE LABOR MARKETS FORCED SAVINGS FUND MANAGEMENT HOME IMPROVEMENT HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME SOURCES INCOME SUPPORT INCOME SUPPORT PROGRAMS INCOME SUPPORT SYSTEMS INDIVIDUAL ACCOUNT INDIVIDUAL ACCOUNTS INDIVIDUAL PENSION INDIVIDUAL SAVINGS INFLATION INFORMAL ECONOMY INFORMAL LABOR MARKETS INFORMAL SECTOR INSURANCE COMPANIES INSURANCE POLICIES INSURANCE SCHEME INSURANCE SCHEMES INTEREST RATES INVENTORY INVESTING INVOLUNTARY UNEMPLOYMENT JOB CREATION JOB LOSS JOB MARKET JOB SEARCH JOB SECURITY JOB SEPARATION JOB TENURE JOB TRAINING JOBS LABOR CONTRACT LABOR CONTRACTS LABOR COSTS LABOR ECONOMICS LABOR FORCE LABOR LAWS LABOR LEGISLATION LABOR MARKET LABOR MARKET CONDITIONS LABOR MARKET PERFORMANCE LABOR MARKET POLICIES LABOR MARKET REFORM LABOR MARKET REFORMS LABOR MARKET REGULATION LABOR MARKET REGULATIONS LABOR MARKETS LABOR MOBILITY LABOR PRODUCTIVITY LABOR REGULATION LABOR REGULATIONS LABOR RELATION LABOR SUPPLY LABOUR LABOUR ADJUSTMENTS LABOUR CONTRACTS LABOUR MARKET LABOUR MARKETS LIABILITY LIVING STANDARDS LOAN LOW INCOME LOW INCOMES LOW UNEMPLOYMENT LOW-INCOME LUMP SUM MANDATED BENEFITS MANDATORY SAVINGS MANDATORY SEVERANCE MARKET TRENDS MARKET TURNOVER MAXIMUM CONTRIBUTIONS MINIMUM BENEFITS MINIMUM CONTRIBUTIONS MINIMUM PAYMENTS MINIMUM WAGE MINIMUM WAGES MONITORING COSTS MONTHLY INCOME MORAL HAZARD MORTGAGE MORTGAGE PAYMENTS PENSION PENSION FUND PENSION FUND ADMINISTRATORS PENSION FUNDS PENSION PLANS PENSION REFORM PENSION REFORMS PENSION RIGHTS PENSION SCHEMES PENSION SYSTEMS PENSIONS POOL OF FUNDS PRELIMINARY RESULTS PRIME AGE PRIVATE FINANCIAL INSTITUTION PRIVATE SECTOR PROGRAM DESIGN PROPERTY TAX PUBLIC ECONOMICS PUBLIC PENSION PUBLIC WORKS PURCHASING POWER RATE OF RETURN RATE OF RETURNS RATES OF RETURN RENTS RETIRED RETIREMENT RETIREMENT ACCOUNTS RIGID LABOR MARKET RISING UNEMPLOYMENT RISING UNEMPLOYMENT RATE RISK MANAGEMENT SAFETY SAFETY NET SAFETY NETS SALARY SAVINGS ACCOUNT SAVINGS ACCOUNTS SEVERANCE PAY SEVERANCE PAY SYSTEM SEVERANCE PAYMENT SEVERANCE PAYMENTS SOCIAL ASSISTANCE SOCIAL FUND SOCIAL FUNDS SOCIAL INSURANCE SOCIAL PROTECTION SOCIAL SECURITY SOCIAL SERVICES SOURCE OF INCOME SOURCES OF INCOME TEMPORARY WORKERS TERMINATION TREASURY BONDS UNEMPLOYED UNEMPLOYED WORKERS UNEMPLOYMENT UNEMPLOYMENT ASSISTANCE UNEMPLOYMENT BENEFITS UNEMPLOYMENT DURATION UNEMPLOYMENT INSURANCE UNEMPLOYMENT INSURANCE PROGRAM UNEMPLOYMENT RATES VALUATION VOLUNTARY CONTRIBUTIONS WAGE GAP WAGE INCREASE WITHDRAWAL WORKER WORKERS WORTH YOUNG WORKERS YOUTH EMPLOYMENT
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000386194_20111111025924 http://hdl.handle.net/10986/2369

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Summary:	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.

Reforming Severance Pay : An International Perspective

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