Termination laws by country

The Regular Employment Pillar: What It Measures

The OECD Employment Protection Legislation (EPL) database measures termination rules through its Regular Employment pillar (Pillar 1). This pillar focuses on the dismissal of individual permanent employees and is composed of several sub-indices:

• Procedural inconveniences: Steps the employer must take before serving notice, written notification, third-party involvement, time to consider the decision
• Notice period: Weeks of advance notice required before termination takes effect, measured at 9 months, 4 years, and 20 years of tenure
• Severance pay: Months of wages owed at termination, measured at the same three tenure levels
• Dismissal difficulty: Whether valid grounds are required, the probability and cost of reinstatement if unfair, and expected compensation payable
• Probation: Maximum statutory probationary period, during which reduced protections apply

These components are scored individually and aggregated into the pillar score. Understanding each component separately is more useful for planning than reading only the aggregate.

Notice Periods: How Long Must Employers Wait?

Notice periods define the minimum time between announcing a termination and it taking effect. Most countries scale notice with tenure, a long-serving employee is entitled to more notice than a new hire.

The OECD measures notice periods at three tenure levels that are standard benchmarks for comparison:

• 9 months: A relatively new hire, still building tenure
• 4 years: An employee with a few years of service
• 20 years: A long-serving employee

The contrast across countries is stark. In the United States, statutory minimum notice for individual dismissal is effectively zero in most at-will states, there is no federal minimum notice period for private-sector workers. In Germany, statutory notice periods under the Civil Code (BGB) begin at 4 weeks for new hires and scale up to 7 months for employees with 20 years of service. In Portugal, minimums are among the highest in the OECD dataset.

Note that many workers, particularly those covered by collective agreements or with individually negotiated contracts, may be entitled to longer notice than the statutory minimum. EPL scores reflect the statutory floor, not typical practice.

Severance Pay: The Cost of Ending Employment

Severance pay is compensation owed to a departing employee in addition to wages earned during the notice period. Not all countries require statutory severance, the US has no federal statutory severance requirement, and the UK provides only Statutory Redundancy Pay after two years of service in redundancy situations (not general dismissals).

Countries with statutory severance typically calculate it as a multiple of monthly wages, scaled by years of service. At 20 years of tenure, severance obligations in high-EPL markets can represent a year or more of salary. For employers, this creates a real financial liability that should be factored into workforce planning and, in some cases, provisioned on the balance sheet.

Dismissal Difficulty: Beyond Notice and Severance

Some countries make dismissal procedurally and legally difficult even when all financial obligations are met. The OECD dismissal difficulty sub-index captures this by scoring:

• Whether the employer must state valid grounds for the dismissal (not required in at-will US employment; required in Germany)
• The procedural steps required before notice can be given (e.g., written warnings, opportunity for the employee to respond)
• Reinstatement rights if a labour court finds the dismissal unfair, in some countries, employees can be reinstated against the employer's wishes
• Expected compensation in unfair dismissal cases, beyond the contractual severance

Germany vs United States: A Study in Contrasts

The Germany-US comparison illustrates how far apart employment protection frameworks can be within the set of developed economies.

Germany scores 2.98 out of 6 on regular employment protection, one of the highest in the OECD. Dismissals of employees covered by the Dismissal Protection Act require valid grounds. Employees can challenge dismissals in labour court within three weeks of receiving notice. Courts frequently find dismissals procedurally defective. Reinstatement is a possible remedy, though in practice most disputes are resolved through negotiated severance. Statutory notice periods scale from 4 weeks to 7 months. Collective agreements in major sectors add further protections on top of the statutory baseline.

The United States scores 0.09 out of 6 on regular employment protection, the lowest in the OECD. Employment at will is the default in 49 states, meaning either party can end the relationship at any time for any lawful reason, without notice or severance. Federal law provides some exceptions (discrimination, retaliation), and some states have additional protections, but the baseline offers employers maximum flexibility. Individual employment contracts may provide notice or severance, but these are negotiated terms, not statutory minimums.

Notice-period buckets across the OECD

Among OECD members, statutory notice for a five-year-tenured employee clusters into four bands: 1-4 weeks (United States, where most states have no statutory minimum), 4-8 weeks (United Kingdom, Ireland), 8-16 weeks (most of Western Europe), and 16+ weeks (Germany at six months for tenured staff under §622 BGB). Notice scales with tenure in nearly every regime, but the slope of that scale is the dominant differentiator across countries.

Severance multipliers and how they compound

The standard severance benchmark is days or weeks of pay per year of service. France pays roughly 0.25 months per year for the first 10 years and 0.33 months thereafter. Italy uses TFR (Trattamento di Fine Rapporto), accruing about one month's pay per year. Mexico is the OECD outlier at 90 days of pay plus 20 days per year of seniority. Compounding makes the difference dramatic: a 20-year veteran in Mexico can claim more than 13 months' severance, while the equivalent worker in the United States may receive nothing statutorily.

Probation periods cap protection in the early years

Most regimes allow a probation period during which dismissal protections are reduced or absent. ILO EPLex tracks the maximum statutory probation: 6 months in Germany, 12 months in Spain (under recent reforms), and indefinite in jurisdictions without a statutory cap. A short probation is itself a form of worker protection: the sooner full protections attach, the harder it is to use trial periods as a low-cost-dismissal workaround.

Collective dismissal triggers

In many EU member states, a dismissal becomes "collective" once a threshold is crossed (commonly 10 employees in 30 days for firms with 20-100 staff). Crossing the threshold triggers consultation with workforce representatives, prior notification to labor authorities, and waiting periods of 30-60 days. Employers planning reductions should model not only individual termination cost but also whether the cumulative count crosses these triggers, a single extra dismissal can move a project from the individual to the collective regime.

Reading the country comparison table

The summary below compares five high-coverage OECD members on three core dimensions: typical notice for a 5-year-tenured worker, statutory severance for the same profile, and the EPLex regular-employment composite reported by ILO.

Worked example: a 10-year-tenured engineer made redundant

Take a senior engineer with $850K in cumulative tenure value (annual salary $85K × 10 years) being made redundant on identical commercial grounds in two markets. In the United States, with no statutory severance and only a customary 8-week notice (often paid in lieu), the all-in employer cost is roughly $13K, about 75% of the cost going to bridge benefits and 25% to ex gratia severance. In Germany, the same engineer's package is materially heavier: 6 months' notice, plus social-plan severance of approximately 0.5 months per year, plus contributions, totalling roughly $1.2M in employer cost when account is taken of pension and unemployment-insurance topping. The same labor input costs about $1.2M to release in one market and roughly $13K in the other, a 92% gap that explains why hiring caution and severance reserves diverge so sharply across borders.

Practical Implications for Employers

Understanding a country's termination framework affects workforce planning in several ways:

• Hiring decisions: In high-EPL markets, the decision to hire is also implicitly a decision about the cost and complexity of ending that relationship. Some employers in high-EPL markets prefer extended contracts, probationary periods, or agency staffing as a way to test workers before committing to permanent employment.
• Restructuring timelines: A workforce reduction that might take 60 days in a low-protection market can take 6–12 months in a market with long statutory notice periods and mandatory collective consultation requirements. Factor this into any restructuring project plan.
• Severance budgeting: For tenured employees in high-EPL markets, the total cost of ending employment, notice pay, statutory severance, and any legally required additional payment, should be modelled before decisions are made.
• Settlement risk: In markets with high dismissal difficulty scores, unfair dismissal claims carry real financial exposure beyond contractual obligations. Legal review of termination decisions before they are executed is standard practice in these markets.

Practical Implications for Employees

For workers, EPL scores provide a rough guide to how protected their employment relationship is in their country. High regular employment scores generally mean:

• Employers must have documented reasons to dismiss you
• You are entitled to advance notice measured in weeks or months, not days
• Financial compensation at termination is legally guaranteed, not negotiated from a position of no legal entitlement
• Labour court access is available if you believe the dismissal was unlawful

Low EPL scores do not mean no protections exist, anti-discrimination laws and specific statutory protections apply in most countries regardless of overall EPL score, but they do mean the default employment relationship is more easily ended by the employer.