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← Overview Database of Innovative Social Policies in Europe

Exempting more SMEs from statutory employment protection

Country of implementation
Germany
General short description of the innovation
The threshold of applicability of employment protection legislation in terms of company size was raised from more than five employees to more than 10 employees. It was estimated from the distribution of employment over company sizes that by this deregulation another 10 percent of the workforce were excluded from statutory employment protection.
Target group
Total Population
Policy Field
  • employment
Type of Policy
  • public
Duration of the policy
2004 - open-ended
Scope of innovation
  • Scope: structural, as the applicability of statutory employment protection was narrowed
  • Budgets: not applicable
  • Number of intended beneficiaries: Not specified
  • Spatial coverage: national
General description of (intended) objectives and strategies
Discourse preceding the reform pictured small employers with 5 employees as being reluctant to expand their business and hiring more employees because they would then cross the threshold of EPL applicability. The objective, therefore, was to create more jobs and to improve the chances of unemployed jobseekers to be hired.
Nature of the innovation-long-term perspective
The innovation took a long-term perspective though its scope was quite limited (roughly 10% of the workforce potentially affected).
Type of ideal-typical strategy for the innovation
  • typical strategy for the innovation (optional; according to Obinger)-liberalisation
Type of innovation
  • retrenchment or expansion of an existing/earlier policy
New outputs
  • others (The intended output was job creation. Actually, employment grew in numbers from 2006 but the contribution of EPL deregulation was never measured)
Intended target group
Inactive population, including unemployed.
Working age population
  • main source of income: paid work
  • main source of income: social protection (please specify; e.g. unemployment benefits/disability benefits/social assistance/other benefits)
Actors involved in policy-making/implementation and/or evaluation
  • making/implementation and/or evaluation-central state
  • making/implementation and/or evaluation-employers (organised or individual) (employers¡ associations endorsed the reform)
Intended output
  • regulation of the labour market
Did the innovation have any outcome related to job quantity?
did increase for many reasons; contribution of the innovation under consideration remains unclear. Overall labour turnover has fallen which might indicate (in conjunction with other deregulating reforms at the same time) that deregulation does not increase operational flexibility of labour markets. intention was to increase labour demand; labour demand actually did increase from 2006 on; contribution of the innovation under consideration remains unclear. was reduced for many reasons; contribution of the innovation under consideration remains unclearTheoretically, the reform should have made fixed-term contracts obsolete in the affected company size category between 6 and 10. Evidence on this is not available.
Intended and unintended outcomes
impossible to quantify
Clarification of outcomes in terms of impacting resilience and labour market inclusion
Given the largely informal nature of workplace relations in the very small firms concerned, the practical impact of the reform is probably marginal. Even employers concerned may be unaware of the change in their legal situation.
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