Employing Workers methodology

See Employing Workers data here.

Doing Business measures the flexibility of regulation of employment, specifically as it relates to the areas of hiring, working hours, and redundancy rules and costs.  Doing Business 2020 presents the data for the employing workers indicator on the Doing Business website. The study does not present rankings of economies on these indicators or include this indicator set in the aggregate score or ranking on the ease of doing business. The data on employing workers are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and regulations as well as secondary sources are reviewed to ensure accuracy.

To make the data comparable across economies, several assumptions about the worker and the business are used.

Assumptions about the worker

The worker:

  • Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.1
  • Is a full-time employee.
  • Is not a member of the labor union, unless membership is mandatory.

Assumptions about the business

The business:

  • Is a limited liability company (or the equivalent in the economy).
  • Operates a supermarket or grocery store in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.
  • Has 60 employees.
  • Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and apply even to firms that are not party to them.
  • Abides by every law and regulation but does not grant workers more benefits than those mandated by law, regulation or (if applicable) collective bargaining agreements.

Employment

Data on employment cover three areas: hiring, working hours and redundancy rules.

Data on hiring cover five questions: (i) whether fixed-term contracts are prohibited for permanent tasks; (ii) the maximum cumulative duration of fixed-term contracts; (iii) the length of the maximum probationary period (in months) for permanent employees; (iv) the minimum wage for a cashier, age 19, with one year of work experience; and (v) the ratio of the minimum wage to the average value added per worker.2 

Data on working hours cover eight questions: (i) the maximum number of working days allowed per week; (ii) the premium for night work (as a percentage of hourly pay); (iii) the premium for work on a weekly rest day (as a percentage of hourly pay); (iv) the premium for overtime work (as a percentage of hourly pay); (v) whether there are restrictions on night work; (vi) whether there are restrictions on weekly holiday work; (vii) whether there are restrictions on overtime work; and (viii) the average paid annual leave for workers with one year of tenure, five years of tenure and 10 years of tenure.

Data on redundancy rules cover eight questions: (i) whether redundancy is allowed as a basis for terminating workers; (ii) whether the employer needs to notify a third party (such as a government agency) to terminate one redundant worker; (iii) whether the employer needs to notify a third party to terminate a group of nine redundant workers; (iv) whether the employer needs approval from a third party to terminate one redundant worker; (v) whether the employer needs approval from a third party to terminate a group of nine redundant workers; (vi) whether the law requires the employer to reassign or retrain a worker before making the worker redundant; (vii) whether priority rules apply for redundancies; and (viii) whether priority rules apply for reemployment.

Redundancy cost

Redundancy cost measures the cost of advance notice requirements, severance payments, and penalties due when terminating a redundant worker, expressed in weeks of salary. The average value of notice requirements and severance payments applicable to a worker with one year of tenure, a worker with five years and a worker with 10 years is considered. One month is recorded as 4 and 1/3 weeks. Data on the availability of unemployment protection for a worker with one year of employment is also collected.

Reforms

The employing workers indicator set tracks changes in labor rules every year. Depending on the impact on the data, certain changes are classified as reforms and listed in the summaries of Doing Business reforms in order to acknowledge the implementation of significant changes. Examples include a change in the maximum duration of fixed-term contracts, regulation of weekly holiday work, redundancy rules, notice requirements and severance payments for redundant workers.The introduction of a minimum wage in the private sector is recognized as a major reform and acknowledged in the reform summary. Changes in minimum wages are reflected in the Doing Business data but not acknowledged in the reform summary. Occasionally the employing workers indicator set will acknowledge legislative changes in areas not directly measured by the indicators. This option is reserved for legislative changes of exceptional magnitude, such as the introduction of a new labor code.

The data details on employing workers can be found for each economy at http://www.doingbusiness.org. The Doing Business website also provides historical data sets. The methodology was developed by Botero and others (2004). Doing Business 2020 does not present rankings of economies on the employing workers indicators.

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1 The case study assumption that the worker is 19 years old with one year of work experience is considered only for the calculation of the minimum wage. For all other questions where the tenure of the worker is relevant, Doing Business collects data for workers with 1, 5 and 10 years of tenure.
2 The average value added per worker is the ratio of an economy’s GNI per capita to the working-age population as a percentage of the total population.