El Mercurio | Compensation cap for years of service
In light of the discussion on whether or not to eliminate the current cap on severance pay for years of service, El Mercurio, a national daily, comments on some public policy models around the world which do not include severance pay. Among the specialists consulted is our partner Paz Palma, who heads Palma’s Labor practice.
Paz says: “The proposal of pro-government deputies would be a deterrent to having a stable workforce over time. In addition, the current dismissal system is already very restrictive in terms of grounds and the amount of the associated severance pay. Large companies can provision for the future cost of a layoff, but SMEs cannot. Even implementing a measure such as the insurance of Nordic countries may be complex to implement in the current labor context. The problem is that SMEs do not have the cash flow for this, and it will discourage employment. The legislative reform skips a stage; measures to improve productivity and labor training should be considered”.

















