[playing_colours]

In Germany we have probation period of 6 months that helps both sides to decide if they want to continue employment.

Can you please explain the causation between easiness of firing / hiring and high salaries?

[dsr_]

I can explain the theory.

In scenario H (for hard to fire), we expect employers to spend more time evaluating new hires, because if they make a suboptimal choice, they will be stuck with that employee until they can justify to the authority that the employee is not suitable. This makes them averse to hiring quickly, and also averse to paying a premium unless they are extremely certain of the results. We then expect potential employees to spend more time vetting potential employers, because any involuntary job search process is going to be long and expensive.

In scenario E (for easy to fire), we expect employers to spend less time evaluating new hires, and to be more agreeable to paying a premium, because the loss of hiring suboptimally can be swiftly ended. Since employers hire faster, we expect employees to spend less time vetting employers, since getting a new different job should take less time.

In practice, I suspect that current economic situations are much more of a driver than the regulatory regime.

[esafak]

I can't imagine employers spending more time vetting employees in the tech sector than they already do. The gauntlet candidates run through today is overkill. What more can they test?

[FredPret]

Well probation isn't really what I was talking about. That's sort of a pre-employment notice period.

I'm talking about a post-employment notice period. How much notice does the employee get between getting fired and then no longer receiving paycheques? Basically, how much severance does the company have to pay?

Add to this any red tape involved in firing someone.

Now look at it from the point of view of the company. If I, the business owner, know that I have to comply with a raft of regulations and pay several months' severance to fire someone, I'll be very reluctant to hire them in the first place. I'll jump through hoops, work late nights, outsource the job, do anything I can to avoid hiring someone.

On the other hand, if I'm in an at-will state in the US, you can fire someone for no reason with zero notice. Seems crazy right? But it means I won't even think twice about hiring someone either. Could they maybe help on a project? Sure, hire them! Frequently one thing leads to another and employees stay on for a long time anyway.

Now in the second case the same number of companies with the same capital available will end up hiring lots more people due to the lower friction.

Make it easy to get out of a situation, and more people will want to get into that situation.

[charliea0]

If you hire someone for 100k per year and it turns out they only contribute 50k per year, then you lose a minimum of 25k over those six months.

As a business you're more risk-averse in offering high salaries since it costs more when you make a mistake.

[epups]

You can actually fire people with only two weeks notice during the first 6 months. I think the risk really is that nay inherent flaws in a highly paid employee are not detected early, and to fire them later is indeed very costly and complicated.

[hirako2000]

What I understood is that it's pretty easy to fire someone in the US without cause. Pretty impossible in most countries in Europe.

[dsr_]

Correct, although there is a legal conundrum. If you fire someone without cause, they can claim that you actually did have a cause, and it's one of the illegal causes. So, it's safer to compile evidence and fire someone for any legal cause -- of which "did not meet company needs" is generally safest.

Even safer is offering them a departure settlement of money and/or insurance coverage, in exchange for which they won't sue you.