The impact of the hiring and firing decision of employment protection legislation on unemployment in South Africa

Abstract

The impact of strict employment protection legislation (EPL) on unemployment is still uncertain. However, evidence in literature points to the hiring and firing provisions of EPL being the source of some of the labour market rigidity in South Africa.Hiring and firing provisions comprise a number of elements such as severance pay, dismissal procedures, probationary employment and temporary work arrangements. This research investigates the impact of these measures on the hiring and firing decision through a survey questionnaire distributed to approximately 20 000 small business respondents, who were also tested on the impact of EPL on small business in creating new jobs.The purpose of the research was therefore to contribute to the literature on the role which EPL plays in the hiring and firing decision, and ultimately on unemployment.The results of the research point to a still strong perception that EPL in South Africa is strict despite evidence to the contrary, and that small business respondents believe procedural elements play a significant role in their hiring and firing decision, but some uncertainty with regard to the role of severance pay. The strongest indication was the perception of the regulatory burden of EPL faced by small businesses.