Due to the ever-changing environment in which governments operate, challenges that require new policy responses arise constantly, which require a flexible public administration that is able to adapt. Therefore, the public sector as an employer, and public sector managers in individual institutions, should be able to make changes to the composition and size of the workforce when needed (i.e. due to poor performance, a fiscal crisis, etc.). Having mechanisms that enable such flexibility – based on reasonable justifications – and effectively using them when needed, are key to ensure the effectiveness of policies and the efficient use of public resources. In the context of Latin American and Caribbean (LAC) countries, such flexibility needs to be balanced with safeguards against workforce decisions based on political considerations.
Survey results for LAC countries indicate that most countries have regulations for the dismissal of permanent employees in certain cases. In 83% of respondent countries, the legal framework allows for termination of employment due to restructuring and in 100% due to poor performance (although rarely used). In Brazil and Uruguay, the law prohibits dismissal due to restructuring, and in Argentina, dismissing an employee is only feasible if the function and the associated job posts are eliminated within the organisational structure and the public servant chooses not to be reallocated. Legal frameworks allow employees to be made redundant due to restructuring in 86% of OECD countries and due to bad performance in 97% of them.
Dismissing public employees is not a common practice, despite legal provisions to do so. According to survey results, only 33% of the countries that allow employees to be dismissed due to restructuring do so regularly. Another 33% of the countries rarely do so and only one does so from time to time. In the OECD, only 19% of countries reported very infrequent dismissals due to management reasons (36% do so from time to time and the remaining 22% reported doing so regularly). In the case of dismissals due to poor performance, 15% of OECD countries reported using this mechanism frequently.
Probably due to the rigidities in practice explained above, LAC countries have opted for alternative mechanisms for restructuring their public workforce. One of them is recruiting employees on fixed-term contracts (as opposed to permanent staff), which presents fewer legal and procedural restrictions to terminate a contract. These currently constitute 24% of employees in LAC countries. There are large differences among countries: while in El Salvador there are no fixed-term employees, the proportion reaches 92% in the Dominican Republic (see two-pager on recruitment).
Another strategy has been to offer voluntary termination packages; 67% of the countries reported using such initiatives in recent years (early retirement programmes in Argentina, Chile, El Salvador and Jamaica and voluntary separation programmes in Colombia, Costa Rica, Guatemala and Mexico). Only Brazil, Peru and Uruguay have not applied these schemes.
By comparison, 31% of OECD countries reported having regularly devised plans to encourage voluntary departures. However, during the last economic and financial crisis, OECD countries implemented a variety of measures (income freezes, cross-cutting employment cuts, outsourcing, voluntary termination) that allowed them to manage employment levels with greater speed and impact.
