Why the Same Rule Works Differently

Employment protection legislation is written as a set of formal rules, but the protection gap is experienced through enforcement and firm behaviour. This chapter asks why strict restrictions on temporary contracts can coexist with widespread temporary employment, and why the same labour-market rule can produce different results across countries. The value of the diagnosis is practical: it lets us distinguish a flawed rule from a sound rule that is unclear, difficult to enforce, or operating in a market where firms and workers have very different alternatives.

A legal restriction is not the same thing as a labour-market outcome. The written rule may limit the reasons for a fixed-term contract or restrict repeated renewals. Employers may still interpret the boundary broadly, classify continuing work as temporary, use another contractual arrangement, or accept the risk of non-compliance. Workers may have a right to challenge the arrangement but be unable to do so without risking their next pay cheque. Between the statute and the observed contract sits an institutional system.

When the law says one thing and the labour market shows another

The first symptom of an enforcement gap is a mismatch between formal restrictions and the incidence of temporary work. The OECD brief reports that temporary contracts still accounted for roughly 15% to 16% of dependent employment in Italy, Portugal, and Spain in 2024, even though restrictions on their use were strict. The corresponding figure for the European Union as a whole was 13%. Spain had an especially revealing earlier combination: formal restrictions were already relatively strict, yet temporary employment was between about 24% and 27% of employment during 2015–2021.

These figures do not prove that the law failed, and they are not a complete causal decomposition of why temporary employment remained high. Definitions, sectors, economic cycles, enforcement, and the composition of dependent employment affect cross-country comparisons. The figures do establish a narrower point: formal strictness does not guarantee that temporary work will be rare or that the intended protection will reach every worker. A policy evaluation must therefore examine what happens after the rule is enacted.

The first possible cause is ambiguity. A restriction that says temporary work must respond to a temporary need still requires someone to decide what counts as temporary. If the categories are unclear, an employer can treat a continuing staffing need as an exceptional one, or a worker may not know whether the contract has been misused. Ambiguity also makes enforcement slower and more expensive. A court or inspector must first reconstruct the underlying work relationship before deciding whether the legal label fits.

The second cause is weak representation. Permanent workers often form the core of trade-union membership and collective bargaining, while temporary workers are more dispersed and less secure. If representation follows the protected core, the people most exposed to the protection gap have less influence over the rules that govern their contracts and less assistance in challenging misuse. This does not make collective bargaining a problem in itself. It shows that worker voice can be unevenly distributed in the same workplace.

The third cause is vulnerability.