Peru remains one of the most rigid labour markets in the world. It ranks 83 among 93 countries regarding difficulties to dismiss employees.

Such is the information reported by the Global Talent Competitive Index, a research published by the international firm Adecco and created using data from December 2014.

Adecco Peru’s General Manager, Carlos San Román, stated that difficulties are mainly due to high costs in compensations for dismissal, risks of replacing a worker and restrictions to establish temporary contracts’ modes.

“In Peru, there is great rigidity and that makes us lose competitiveness on a regional level”, said San Román.

When compared with other legal frameworks, such as the Colombian or Chilean regulations, it stands out that fixed-term contracts are very restricted

“In those countries, hiring is almost free. You may quickly hire and dismiss as it is a key step to create more jobs”, said the executive.

In the indicator “difficulties to hire”, Peru is number 58.

Another country with strong restrictions in both indicators is Venezuela.

The countries within the region that rank best in the Global Talent Competitiveness Index are Chile, Costa Rica and Panama.

“After the crisis in Europe, countries such as France, made their markets more flexible, particularly for temporary contracts, which helped their economies to start functioning again”, pointed out San Román.

Carlos San Román stated that there is a risk in Peru of “swimming against the tide” as there is an attempt of increasing the compensation for dismissal in the Labour Bill (the limit would go up to 12 to 16 wages).

“There is no logic in that, the country needs more flexibility. The idea is that this proposal will grant more security for the worker, but it will only reduce investment”, he added.

Román is concerned about another indicator, “political stability” (Peru ranks number 77), as most business decisions depend on this variable.

“Last year, the score dropped. And it is important to point out that the study did not consider the case of the youth employment Act, where the Government had to step back, causing instability”, he concluded.

According to the survey, there are a number of instructions and key recommendations to improve talent competitiveness, both in countries and in companies:

1. Permanent training and development opportunities are needed to complement formal education.

2. Talent development strategies should focus on the concept of labour capacities to satisfy business needs.

3. Trade, investment and labour mobility openness is a key element to reach talent competitiveness.

Besides, countries should develop structural reforms to improve their competitiveness by:

1. Increasing the labour markets’ flexibility, assuring more rotation and access to jobs.

2. Simplifying labour legislation and bureaucracy.

3. Liberalizing the labour market: throwing down rules and barriers, reducing employment taxes to increase productivity and improving competitiveness in the international scenery.