This report provides general principles for the design and implementation of labor regulations in four areas:
- employment contracts
- minimum wages
- dismissal procedures, and
- severance pay and unemployment benefits.
The report suggests that there are general principles that can guide the design of labor regulations. Beyond some of these general principles, however, there is no overall blueprint to design or adapt labor regulations. Rather, there are different reform paths that depend on country characteristics and are shaped by social, political, economic, and historical circumstances combined with different legal traditions. A recommendation is to reform labor regulations in a systematic and comprehensive manner. In the past, several countries narrowly focused on selected labor regulations without considering the complexity of effects on the labor market.
It is necessary to recognize, however, that there are limits to what labor laws and policies can accomplish. In particular, labor regulations primarily benefit employees in the formal sector. According to recent estimations, over 60 percent of jobs in middle- and low-income countries are in the informal sector; these include farmers, the majority of own-account workers and informal wage employees, or close to 1.5 billion workers Also, in many countries, employment laws are often ineffective because of evasion and weak enforcement, even for workers with formal employment.