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Empirical Analysis of the Severance Pay Non-Performance in Slovenia

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Author Info

  • Milan Vodopivec

    (World Bank, USA)

  • Lilijana Madjar

    (Public Guarantee Fund of Slovenia)

  • Primoz Dolenc

    (University of Primorska, Slovenia)

Abstract

Combining information from the Firm Survey of Labor Costs with the information about claims filed with the Guarantee Fund by workers whose employers defaulted on their severance pay obligations, the paper analyzes the so-called non-performance problem of severance pay – the fact that coverage, and thus legal entitlement, does not guarantee the actual receipt of the benefit – as experienced in Slovenia in 2000. The findings are threefold: (i) one-third of total obligations incurred by firms failed to be honored and only a small portion of defaulted severance pay claims was reimbursed by the Guarantee Fund; (ii) while both men and women seem to be equally affected, workers older than 40 were disproportionally represented among those whose severance pay claims failed to be honored; and, (iii) among firms that incurred severance pay liabilities, larger and more productive firms were more likely to observe their fiduciary obligations and pay them out. These findings corroborate the weaknesses of severance pay as an income protection program, pointing to the large scale of the non-performance problem and the inequities created by it.

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Bibliographic Info

Article provided by University of Primorska, Faculty of Management Koper in its journal Managing Global Transitions.

Volume (Year): 7 (2009)
Issue (Month): 4 ()
Pages: 333-348

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Handle: RePEc:mgt:youmgt:v:7:y:2009:i:4:p:333-348

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Related research

Keywords: severance pay; severance pay non-performance; Guarantee Fund; Slovenia;

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References

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  1. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
  2. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection Discussion Papers 62726, The World Bank.
  3. Jan C. van Ours & Milan Vodopivec, 2006. "How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 351-378, April.
  4. Peter F. Orazem & Milan Vodopivec, 2009. "Do Market Pressures Induce Economic Efficiency? The Case of Slovenian Manufacturing, 1994–2001," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 553-576, October.
  5. Reinhard Koman & Ulrich Schuh & Andrea Weber, 2005. "The Austrian Severance Pay Reform: Toward a Funded Pension Pillar," Empirica, Springer, vol. 32(3), pages 255-274, 09.
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Cited by:
  1. Brusentsev, Vera & Newhouse, David & Vroman, Wayne, 2012. "Severance pay compliance in Indonesia," Policy Research Working Paper Series 5933, The World Bank.

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