Several reports and papers about Spanish labour market have focused on the allegedlyhigh dismissal costs and the persistently high rate of temporary work. In fact, the last major reforms onlabour regulation have tried to reduce them. In this paper, I will discuss the most relevant expenditureitems that any employer is Spain has to face to lay off workers. Implicit, indirect and procedure costsappear to be the main problem, and not severance payments for unfair dismissal. Despite of the efforts onimproving the regulations being put forward by this article, there are several dysfunctions caused directlyby the law, as it provides incentives to hire temporary workers and to avoid redundancy legal procedures.

Research Group DTCENS - Carlos III University of Madrid